Mortgage Rate Forecast

Mortgage Rate Forecast


  • Bond markets expect very aggressive Bank of Canada
  • Is Canada in a recession?
  • Bank of Canada tightening aggressively now, only to cut rates in 2024?

In BCREA’s last Mortgage Rate Forecast, we anticipated Canadian 5-year fixed mortgage rates would reach 4 per cent later this year. Instead, rates have already sling-shotted to 4.69 per cent as elevated inflation continues to drive interest rate expectations.

Canadian bond markets – and Canadian mortgage rates in turn – have already priced in significant Bank of Canada tightening. The 2-year Canadian bond yield, a good indicator of where markets expect the overnight rate to be two years from now, is already well over 3 per cent. That is an indication that markets believe the Bank will have to be very aggressive in its current tightening cycle, raising the policy rate above the top end of the Bank’s estimate of its neutral rate.

A steep trajectory for the overnight rate implies that the 5-year fixed mortgage rate could reach the 5 per cent level for the first time since 2009 while variable mortgage rates may rise to as high as 4.5 per cent. With the stress test for both insured and uninsured borrowers, prospective homebuyers are currently being qualified at a rate of 6.49 per cent with a strong possibility of qualifying at 7 per cent soon, a rate that has not been a reality in the Canadian mortgage market since the early 2000s.

Given how aggressive markets expect the Bank of Canada to be, any good news on inflation, or any significant deterioration in the Canadian economy, could see a significant reversal in the most recent jump in Canadian bond yields. However, the baseline case for now is a Bank of Canada that is single-minded in its pursuit of lower inflation.

Click here for the full Forecast...

Provided by: BCREA


No comments

Post Your Comment:

Your email will not be published
Reciprocity Logo The data relating to real estate on this website comes in part from the MLS® Reciprocity program of either the Greater Vancouver REALTORS® (GVR), the Fraser Valley Real Estate Board (FVREB) or the Chilliwack and District Real Estate Board (CADREB). Real estate listings held by participating real estate firms are marked with the MLS® logo and detailed information about the listing includes the name of the listing agent. This representation is based in whole or part on data generated by either the GVR, the FVREB or the CADREB which assumes no responsibility for its accuracy. The materials contained on this page may not be reproduced without the express written consent of either the GVR, the FVREB or the CADREB.