BCREA Mortgage Rate Forecast

Mortgage Rate Outlook
Although there have been a number of ups and downs in the Canadian mortgage market over the past 12 months, there was very little movement in posted mortgage rates. In fact, volatility in mortgage rates, as measured by a rolling 52-week standard deviation of posted five-year rates, is at a multi-decade low. With growth and inflation remaining relatively subdued and the Bank of Canada on the sidelines for all of 2013, the unprecedented low volatility in Canadian mortgage rates is likely to continue for much of the year.

While posted mortgage rates remain relatively constant, some chartered banks have recently re-ignited a small furor by again offering below 3 per cent five-year fixed rates to help spur spring-time demand following a nationwide slowdown in home sales activity. We expect that, disapproval from Ottawa notwithstanding, lenders will continue to offer steeply discounted rates to their most credit worthy borrowers while leaving their official posted rates constant. We are forecasting that thefive-year fixed rate will remain at 5.24 per cent, and the one-year rate at 3 per cent for most of 2013 before gradually rising toward the end of the year as the outlook for economic growth improves.

The primary risk to our outlook is that growth in the global and Canadian economy will outperform current expectations. Faster growth could cause bond yields to quickly rise off of their current near historic lows, thereby forcing banks to re-price their mortgage offerings.


Mortgage Rate Forecast is published quarterly by the British Columbia Real Estate Association. Copyright British Columbia Real Estate Association. Reprinted with permission.



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