BCREA: Mortgage Rate Forecast June 2022

BCREA has released it’s latest mortgage rate forecast. To summarize their report:

  • In the last report BCREA forecasted that the 5 year fixed mortgage rates would reach 4% later in 2022. Instead they are at 4.69% to battle inflation.
  • Bond markets expect very aggressive Bank of Canada.
  • Expecting the 5 year fixed mortgage rate to reach 5% which is the first time since 2009.
  • Current Buyers currently qualified at a rate of 6.49% with it likely going up to a 7% qualification soon. This has not been seen in the Canadian market since the early 2000’s.
  • Bank of Canada’s main focus is to lower inflation at this time.

Economic Outlook

  • Growth in the first quarter of 2022 was 3.1%.
  • Likely will see a slow down in growth due to inflation.
  • Growing concern that 2023 will see a recession but indicators suggest the economy is not currently in a recession.

Bank of Canada Outlook

  • The ultimate end for interest rate increases will depend on the trajectory of inflation over the next few months.
  • Some see signs of inflation peaking while consumer and commodity prices continue to rise.

Full Report is included below or download the PDF here.

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BCREA Mortgage Rate Outlook

BCREA released it’s latest mortgage rate outlook. Read below and link to full report is included below.

The average Canadian 5-year fixed rate has fallen to under 2 per cent, the result of a rapid and overwhelming policy response from the Bank of Canada to the COVID-19 pandemic. The Bank swiftly brought its overnight rate to its effective lower bound of 25 basis points and used the impressive scope of its balance sheet to counteract a nascent rise in credit spreads. Those measures, and those of its global counterparts, helped to forestall a potential repeat of the credit crisis that shocked the global economy over a decade ago.

The Bank’s foray into quantitative easing (QE), or the purchasing of bonds across the yield curve of short-to-long term maturities, and an injection of liquidity into the mortgage market have resulted in record-low Canadian mortgage rates. The average 5-year fixed rate now sits below 2 per cent and is just 165 basis points over the 5-year government bond yield, essentially in line with the long-term average.

While the average 5-year rate has come down considerably, the qualifying rate remains stubbornly high at 4.79 per cent. That rate has become notoriously divorced from its underlying benchmark in recent years and now sits at a spread of close to 450 basis points over the 5-year bond yield, or about 100 basis points higher.

With the Bank of Canada eschewing negative interest rates and providing forward guidance that it has
no plans to raise its policy rate until slack in the economy is absorbed, there is not much on the
horizon that may move mortgage rates one way or the other. We expect a mild rise in rates as the Bank
slows and eventually ends its QE, perhaps by the end of 2021. Studies show QE lowers long-term interest rates by 10-25 basis points, so we can anticipate a similar magnitude rise in 5-year rates when QE ends.

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

BCREA Mortgage Rate Forecast for March 2020

BCREA just released it’s Mortgage Rate Forecast for March and the year of 2020. With the COVID-19 mortgage rates have dropped. The Bank of Canada recently cut the rate again however says it is at a point where it can’t go lower. It is looking like a Canadian recession is unavoidable however it all depends on how long the pandemic related regulations go on for. This is a large factor that prevents accurate predictions since we have not seen an event of this magnitude in decades.

The Canadian government has postponed changes to the mortgage stress test due to the current events. This will help those renewing or refinancing their mortgages which will free up monthly cash flow due to the lower payments.

Economic growth in Canada was slowed at the end of 2019 due to the rail blockades and now COVID-19. The economy is also dealing with plummeting oil prices, a sharp decline in retail sales, tourism and other consumer related businesses.

It is expected that if we have a strong recovery in the second half of 2020 the Bank of Canada will likely maintain it’s policy rate at 0.25% for the rest of the year.

BCREA Mortgage Rate forecast March 2020 Real Estate BC COVID-19 Coronavirus
BCREA Mortgage Rate forecast March 2020 Real Estate BC COVID-19 Coronavirus

Click here to download the full PDF version of this report.

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

Mortgage Rate Forecast: Rates Set To Rise Again in 2018, BCREA

• Rising rates and tighter mortgage regulations in 2018
• Canadian economy slowing
• Bank of Canada waiting on higher inflation
Mortgage Rate Outlook

Mortgage Rate Forecast chart 2018 Kamloops real estate century 21 Kirsten Mason Team Best top agentCanadian mortgage rates rose substantially in 2017 and are forecast to rise further in 2018. After beginning the year at or near historical lows for both the qualifying rate as well as 5-year contract rates, an acceleration of economic growth prompted a shift at the Bank of Canada and a withdrawal of stimulus implemented to help the economy absorb the oil-shock of 2015.

After the hawkish turn by the Bank of Canada, the Canadian 5-year bond yield, the key benchmark for the mortgage qualifying rate, seemed set on a higher trajectory before a slowing economy and the tepid inflation resulted in markets reassessing the likelihood of further rate hikes. The 5-year mortgage qualifying rate now sits at a three-year high of 4.99 per cent, while most lenders offer a discounted rate of 3.24 per cent. Our baseline forecast for

Mortgage Rate Forecast 5 year Bond vs Mortgage rate Kamloops real estate century 21 Kirsten Mason Team Best top agent

2018 is for those rates to increase to 5.15 per cent and 3.44 per cent, respectively.
One complicating factor will be the impact of new mortgage regulations, which require borrowers with more than 20 per cent equity to qualify at a rate at least as high as the 5-year posted mortgage rate. This will erode purchasing power by as much as 20 per cent, and will likely cause some prospective buyers to delay home purchases. Since non-federally regulated lenders such as credit unions do not need to comply with those regulations, large bank lenders could hold off on raising mortgage qualifying rates to remain competitive.
Economic Outlook
In the four quarters from the second half of 2016 to the first half of 2017, the Canadian economy grew at an average quarterly rate of 3.6 per cent, posting more than 4 per cent
growth in the second quarter of 2017. However, in the third quarter, growth slowed to just 1.7 per cent.
Despite a second-half slowdown, the Canadian economy still saw a surge in employment in October and November and will post annual real GDP growth of over 3 per cent in 2017, making it the envy of most advanced economies around the world.
We do not expect that performance to be repeated in 2018, as the effect of higher interest rates and trade disputes present a drag on growth. Those factors are forecast to slow the overall Canadian economy to a still above-trend 2.2 per cent growth next year. As relatively  strong growth continues to erode slack in the economy, inflation should return to its 2 per cent target by the end of next year.
Interest Rate Outlook

Mortgage Rate Forecast Canadian Output Gap Kamloops real estate century 21 Kirsten Mason Team Best top agentMortgage Rate Forecast Core Inflation Kamloops real estate century 21 Kirsten Mason Team Best top agentMortgage Rate Forecast Output Gap & Inflation Kamloops real estate century 21 Kirsten Mason Team Best top agent

Despite strong economic  growth, Canadian inflation remains subdued. The argument for a more hawkish approach from the Bank of Canada relies on two factors.
Firstly, that the elimination of unused capacity in the economy, generally referred to as the output gap, is inflationary. Therefore, an economy operating at or above capacity, as the Canadian economy is projected to do, should see rising price pressure. That view is supported by statistical evidence, though inflation has been well anchored due to the success of inflation targeting.
Secondly, the Bank’s framework for monetary policy is built upon setting interest rates at a “neutral” level to stabilize consumer price inflation around the Bank’s 2 per cent target. Since the Bank’s policy rate is currently 200 basis points below its estimate of “neutral,” there is an upward tilt to the Bank’s bias. That is, all else equal, the Bank would prefer to see interest rates “normalize” to a higher level over the medium term.
Still, there are significant risks to the downside for the Canadian economy over the next year. Elevated household debt presents a challenging tight-rope for monetary policy, as rates rising too quickly could have substantial and widespread consequences. Moreover, forthcoming restrictions on mortgage qualifying will already have a dampening impact on housing demand, which should also factor into the Bank’s thinking on monetary policy.
Weighing those risks against expectations of a closing output gap and inflation slowly moving toward 2 per cent over the next year, the Bank may still find just enough
reason to raise the its target rate once or twice in 2018.
Link to full PDF: Click here
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