BC Real Estate Association has announced its latest Mortgage Rate Forecast today.

With the growth in Mortgages being at the lowest levels in 17 years, it appears that the Mortgage Stress Tets, introduced earlier this year was far too aggressive.

This, together with low Alberta Oil Prices and potential Economic headwinds, such as the closure of the GM Oshawa Plant may have led the Government to rethink their plan to increase rates to quite the same level next year, and the forecast is now calling for only 1 or 2 rate increases next year, which is potentially good news for new borrowers and those on variable rates.

BCREA's Mortgage Rate Forecast December 2018

Midway through 2018, everything seemed to be pointing to sharply higher mortgage rates. The Canadian economy was soaring, the Bank of Canada and its counterpart in the US were resoundingly hawkish and bond yields were testing multi-year highs. However, declining oil prices, the stronger than expected impact of the B20 mortgage...

The BC Real Estate Association has just released its Fall 2018 Mortgage Rate Forecasts.

As expected Mortgage Rates are likely to be on the rise!

The Canadian Mortgage Market is undergoing significant tightening with the availability of credit falling and interest rates rising. The mortgage stress test introduced in January negatively impacted home sales nationwide as prospective homebuyers with more than 20 per cent down payments were denied access to loans they would have qualified for under the old regulatory regime. As a result, mortgage credit growth in Canada has slowed dramatically. On the pricing side, monetary policy continues to be the primary driver of higher mortgage rates in 2018 as the Bank of Canada embarks on its first tightening cycle since 2004. Although the 5-year qualifying rate was fairly steady over the third quarter, as the Bank continues to tighten, mortgage rates will almost certainly follow.

When the Bank of Canada adjusts its overnight rate, it influences borrowing...

Mortgage Rate Outlook

The Canadian mortgage market has seen substantial changes in the first six months of 2018, with mortgage credit both more expensive and more difficult to access. The B20 stress test for conventional borrowers has slowed overall mortgage credit growth while the five-year qualifying rate for Canadian mortgages has gone up 70 basis points in the past year. Rising mortgage rates have largely been influenced by tighter monetary policy from the Bank of Canada as strong economic growth has fueled rising inflation.

It has been quite some time since Canada was in a true rising interest rate environment. The last cycle of prolonged rate increases was from 2004 to 2007, just prior to the global financial crisis when the Bank of Canada increased its overnight policy rate ten times over three years. Much about the Canadian economy has changed since that time, and those changes have had substantial implications for the ultimate destination of Canadian interest rates....

The BC Real Estate Association has published its latest forecast for Mortgage Interest Rates today.

Mortgage Rate Outlook

Canadian mortgage rates have continued 2017’s upward trend. The five-year qualifying rate for insured mortgages bumped up 15 basis points to 5.14 percent while discounted rates offered by lenders increased similarly to 3.39 percent. The increases were driven by the earlier than expected rate increase by the Bank of Canada in January. The Bank has now raised interest rates three times since last summer, with its key policy rate sitting at 1.25 percent.

The Bank’s next move and the impact on mortgage rates hinges on how Canadian inflation evolves over the next two years. Our baseline forecast, which lines up similarly with the Bank of Canada’s, assumes the Canadian economy will return to its full employment level this year. That would mean inflation returning to the Bank’s 2 percent target with the overnight target rate gradually...

The BC Real Estate Association has today published its latest Mortgage Rate Forecast.

As I suspected they are forecasting further rises - see the table below.

Risk Factors -:

• Changes to the Mortgage Rules in January 2018.
• Elevated Housing Debt.
• The ongoing performance of the Canadian Economy

All of these factors will all play their part. At the end of the day, the Government cannot risk increasing Mortgage Rates too high, or too quickly as this may have a devastating effect on some households and the knock-on effect this would have on the Real Estate Sector, which is an important part of the Canadian Economy.

The full report is available at http://www.bcrea.bc.ca/docs/economics-forecasts-and-presentations/mortgagerateforecast.pdf

Kind Regards

Trish Cenci

Tel 250 864 1707