Farm Credit Canada economist Graeme Crosbie warns that borrowing costs are likely to rise, both for fixed and variable loans. The Bank of Canada’s overnight rate has held steady at 2.25%, but recent shocks—higher fuel prices and a breakdown in Canada‑U.S. trade talks—have financial markets expecting a rate hike as early as December.
Meanwhile, long‑term bond yields are climbing in Canada, the U.S., the U.K., and Japan, driven by inflation concerns, slowing economic growth, and investor worries about government finances. Rising oil and diesel prices—linked to disruptions in the Strait of Hormuz—are adding further inflationary pressure.
Crosbie says fixed lending rates will continue to increase because they are tied to bond yields, not the overnight rate. This means higher costs for mortgages, farm loans, and corporate financing, which could slow economic growth and strain government budgets.
When asked whether farmers should choose fixed or variable loans, Crosbie emphasized that both types are expected to “grind higher”, and the best choice depends on each farm’s financial structure and timing.
Read the full article here: Farm Credit Canada thinks borrowing costs are heading higher
Source: Sean Pratt, The Western Producer
