The economics team of the British Columbia Real Estate Association have issued their latest rate outlook.
They predict that the current low 5-year mortgage rates will remain through this summer before rising into 2010, but the increase will be modest.
Sub-3% rates for 5-year mortgages have returned and the BCREA economists say that the acute repricing of expectations in the bonds market has essentially erased last year’s hikes.
However, the posted 5-year mortgage rate has changed little in the past year despite a drop in bond yields; BCREA Economics’ model suggests that the 5-year posted rate should be 4.84% rather than the current 5.34%.
The team predicts that the 5-year average discounted rate will rise from 2.99% in the second and third quarters of 2019 to 3.14% in the fourth quarter and the first half of 2020 before hitting 3.24% for the second half of 2020.
But the 5-year qualifying rate is expected to hold at 5.34% through until at least the end of 2020.
BoC rate cut?
The BCREA report also notes weakness in the Canadian economy with the risk of recession.
Despite stronger consumer spending and GDP figures recently, the report calls for growth of 1-1.5% for 2019, slower than 2018’s 1.8% rate. This will likely avoid any interest rate hikes in the foreseeable future.
But the Bank of Canada could consider a cut, despite the potential to fuel consumer borrowing and inflation.
That’s because it may provide a cushion to offset the risk of recession in the coming year or so and markets are predicting a BoC rate cut within the next year.
