Are Canadian Mortgage Rates Going Down?

We are a couple months past Christmas, but Canadian homeowners may be in for more treats in the form of a possible mortgage rate cut.

Since the summer of 2017, hard-working Canadian families have been burdened by the regularly escalating mortgage interest rates.  In total, there were 5 quarter-point rate hikes from July 2017 to October 2018.  The Bank of Canada, however, seemed keen to continue increasing its overnight rate till it reached its neutral range between 2.5% and 3.5% (current overnight rate is 1.75%).  This information made most experts believe that there was room for at least a couple of rate hikes in 2019.

No Rate Hikes Since October 2018

Things, however, seem to have changed a little since late 2018.  There were concerns being raised about more than anticipated slowdown of the housing market caused by the rate hikes and new mortgage regulations.  Moreover, business investment into Canada has been sluggish in early 2019 and the robust GDP growth has suddenly slowed down.  According to available stats, Canadian GDP in fact decreased in November and December.  These factors have created an opinion in the market that the rates may not go up immediately.  Moreover, mortgage lenders have started offering discounts on their fixed rate mortgage; which is an indication that they believe the rates are going to stay put in the short-term.

The Possibility of a Rate Cut

Capital Economics, a London based research consultancy, has now gone a step further and predicted a rate cut before the end of 2019.  This prediction is based on the recent tone from senior officials of the Bank of Canada.  Moreover, other economic factors are also suggesting that the Bank of Canada may be forced to consider a rate-cut by the end of 2019 to provide a boost to the housing market.

What does this mean for you?

These are still early days in 2019, and as we know things can change very fast.  If GDP strengthens again and inflation goes further up, opinions and predictions may change.  This news of a possible rate cut may, however, bolster the housing market just before the crucial spring season sets in.  In my opinion, housing prices will go up in 2019 and this may be a good year for you to get into the market and gain from the low real-estate prices.

On the other hand; if your mortgage is coming up for renewal, you can consider getting into a variable mortgage as that will help you avail the benefit of any rate cut that happens during your mortgage term.


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