BCREA Mortgage Rate Forecast for June 2024

To view the full interactive BCREA Housing Forecast, click here.
Download the full report (PDF)

Highlights:

  • Despite the Bank of Canada lowering its policy rate, fixed mortgage rates may not drop significantly as markets have already priced in the expected rate cuts.
  • Canada faces a weak economic outlook and a softening labour market, but growth is expected to pick-up in 2025.
  • After the Bank’s rate cut in June, what comes next?

Click here to visit to BCREA’s website. To view other statistics for the Kamloops and BC real estate market click here.

If you want to be kept informed on Kamloops Real Estate, News and more visit our Facebook Page.

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“Copyright British Columbia Real Estate Association. Reprinted with permission.” BCREA makes no guarantees as to the accuracy or completeness of this information

BCREA Mortgage Rate Forecast March 2024

BCREA has released it’s latest Mortgage Rate Forecast for March for 2024. They outline the main highlights as:
– Canadian mortgage rates down sharply to start 2024.
– The Canadian economy – no recession yet, but growth is very slow.
– Waiting for the Bank of Canada to cut.

Click Here to download the full document. The report is summarized below.

Mortgage Rates

In early October 2023, Canadian five-year bond yields reached a 17-year high at 4.42%. However, within four weeks, they dropped by more than 100 basis points. This significant swing in borrowing costs was triggered by better-than-expected inflation data in both the US and Canada, starting in early fall and continuing through the end of 2023. Consequently, financial markets adjusted their expectations for the timing and extent of monetary easing by the Bank of Canada towards more aggressive rate cuts in the future.

Although bond yields rose slightly in February after the initial drop, the current trend suggests a five-year fixed mortgage rate of approximately 5.2%, which is close to the current average offered rate by major lenders and not far from the anticipated rates by the end of 2024. Discounts on variable rates have increased from prime minus 30 basis points to prime minus 60 basis points, leading to a slight decline in average variable rates. However, a more significant decrease in variable rates is anticipated to occur once the Bank of Canada initiates rate cuts.

Economic Outlook

The Canadian economy narrowly avoided a technical recession in the fourth quarter with meager growth. However, various indicators suggest a fragile economy. Falling real GDP per capita and negative growth in Private Domestic Demand indicate underperformance. Though real gross domestic income recently returned to positive territory, it remains a concern. Despite this sluggishness, the labor market shows surprising resilience. Job growth, though not matching population expansion, persists, with over 40,000 jobs added in February. The national unemployment rate remains steady at around 5.8%, close to pre-pandemic levels. Additionally, wage growth has exceeded 5% for the past three months, significantly outpacing inflation.

Bank of Canada Outlook

Financial markets exaggerated expectations at the end of 2023, pricing in six rate cuts by the Bank of Canada, which is unlikely. However, it’s highly probable that the Bank will start lowering its policy rate this year, with consensus suggesting a cut of up to 2.5%, or 250 basis points. The timing of the first rate cut remains uncertain, but markets heavily favor a 25 basis point cut at the June meeting, with over a 90% probability of a total 100 basis points cut by December. The Bank’s decision in March emphasized the need for progress in bringing core inflation below 3% to avoid premature actions. Considering the significant drop in core inflation in February and the sluggish economy, an April rate cut is plausible, and if not April, then almost certainly June.

Click here to visit to BCREA’s website. To view other statistics for the Kamloops and BC real estate market click here.

If you want to be kept informed on Kamloops Real Estate, News and more visit our Facebook Page.

To search for Kamloops real estate and homes for sale click here.

“Copyright British Columbia Real Estate Association. Reprinted with permission.” BCREA makes no guarantees as to the accuracy or completeness of this information.

BCREA Mortgage Rate Forecast for December 2023

Highlights:
– Benchmark five-year bond yields tumbling, fixed mortgage rates to follow.
– The Canadian economy slowed sharply in the third quarter.
– The Bank of Canada is set to cut in 2024, but how much and how fast?

To view the December 2023 Mortgage Rate Forecast PDF, click here.

Mortgage Rate Outlook

After hitting a 15-year high in late fall, long-term Canadian bond yields have been tumbling to finish the year as financial markets reckon with slowing inflation and the projected end of central bank rate hikes. The five-year Government of Canada bond yield has trended near 3.5 per cent over the last several weeks, and if that level sustains, we will see a meaningful decline in five year fixed mortgage rates to start 2024. Our forecast is for the average five-year fixed mortgage rate to fall to
5.05 per cent by the end of 2024, while variable rates will start falling as the Bank of Canada lowers its overnight rate starting in the first or second quarter.

The ultimate destination for mortgage rates, however, is likely much higher than homeowners or prospective buyers have become accustomed to over the past decade. Indeed, if the Bank of Canada lowers its policy rate to the mid-point of its preferred 2 to 3 per cent range, that would imply a long-run five-year fixed mortgage rate of 4.85 per cent and an associated qualifying rate of 6.85 per cent. In contrast, the average five-year fixed mortgage rate since 2010 has been closer to 3 per cent.

Economic Outlook

Canadian GDP was weaker than expected in the third quarter, declining by 1.1 per cent on an annual basis. At the same time, Statistics Canada revised its second quarter GDP figure considerably upward, indicating that the economy has again avoided entering a technical recession. With October’s preliminary figure again positive, the Canadian economy appears weak but is not shrinking substantially in aggregate terms so far.

While the economy has been surprisingly resilient, there are significant challenges in 2024 that pose a risk to economic growth. First, several interest rate-sensitive types of spending and investment, such as purchases of vehicles and tourism, benefited from pent-up demand following the pandemic. Those sectors will likely see much slower expenditures in 2024. Additionally, while residential investment has held up well this year, high borrowing costs will likely delay development next year.

Second, a wave of mortgage rate renewals for both variable and fixed-rate payers over the next two years will cause a significant increase in monthly payments, necessitating a slowdown in other discretionary consumer spending. That said, the Canadian economy may have weathered the worst of the potential rate impacts on growth and could soon be benefiting from falling rates if progress on inflation continues. As a result, a soft landing for the economy, in which inflation returns to normal without a significant sacrifice in the way of output employment, is increasingly probable.

Bank of Canada Outlook

Given the evidence of a slowing economy and some long-awaited downward momentum in core inflation, it appears likely that the Bank of Canada’s rate-tightening cycle is at an end. If so, the conversation around Bank of Canada meetings in 2024 will shift toward when the Bank might lower rates and how quickly. Given that the Bank’s estimate for its neutral rate is between 2 and 3 per cent, we can expect between 200 and 300 basis points of rate cuts once inflation has reliably returned to its 2 per cent target.

Although material progress has been made in returning inflation to normal, price growth in some areas of the economy appears more challenging to tame. Housing costs, which are a substantial proportion of the CPI basket, continue to appreciate too quickly. Mortgage interest costs have been rising at a 30 per cent rate, propelled higher by the Bank of Canada’s aggressive tightening. However, the year-over-year impact of high mortgage rates will fade in 2024. What may be more persistent is inflation stemming from the rental market. With so much demand from not only a surge in immigration but also a stress test that is keeping would-be buyers in the rental market, combined with very little ability to increase supply quickly, rents will likely continue to grow at an elevated rate in the coming year. Those factors will probably
keep inflation above 2.5 per cent in 2024 and prevent the Bank from lowering rates at a faster pace. Consequently, we expect the Bank will begin lowering rates in the spring, ultimately cutting 75 to 100 basis points by the end of the year and
200 basis points by the end of 2025.

For the complete news release, including detailed statistics, click here.

Click here to visit to BCREA’s website. To view other statistics for the Kamloops and BC real estate market click here.

If you want to be kept informed on Kamloops Real Estate, News and more visit our Facebook Page.

To search for Kamloops real estate and homes for sale click here.

“Copyright British Columbia Real Estate Association. Reprinted with permission.” BCREA makes no guarantees as to the accuracy or completeness of this information.

BCREA Mortgage Rate Forecast for September 2023

Highlights:

  • Bank of Canada tightening sends mortgage rates to 15-year highs
  • Are high rates finally impacting economic growth?
  • How far will fixed mortgage rates fall once the Bank of Canada lowers its policy rate?

BCREA has released the latest mortgage rate forecast. The Bank of Canada raised the rates both in June and July due to a more brisk real estate market and inflation being hotter than expected in the spring. This has created a shift in expectations where it was thought that we may see rates come down in 2024 or 2025. Fixed rate mortgages have hit an annual high approaching 6%. Even though the economy is slowing inflation is still hovering around 3 to 4%. Inflation is not expected to return to a more normalized level until 2025.

To view the September 2023 Mortgage Rate Forecast PDF, click here.

For the complete news release, including detailed statistics, click here.

Click here to visit to BCREA’s website. To view other statistics for the Kamloops and BC real estate market click here.

If you want to be kept informed on Kamloops Real Estate, News and more visit our Facebook Page.

To search for Kamloops real estate and homes for sale click here.

“Copyright British Columbia Real Estate Association. Reprinted with permission.” BCREA makes no guarantees as to the accuracy or completeness of this information.

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