Mortgage Rates Forecast to Rise Again – Next Year

Bank of Canada won’t raise overnight rate again until 2018, predicts BCREA
Joannah Connolly
September 19, 2017

Having raised the overnight rate twice, in July and earlier this month, the Bank of Canada will adopt a wait-and-see approach to its next interest rate hike, according to a Mortgage Rate Forecast report published September 19 by the BC Real Estate Association (BCREA).

Having “surprised” Canada by turning “hawkish” with its sudden interest rate rises, the BCREA’s economists predicted, “We anticipate that the Bank of Canada will hold off on further rate increases this year and assess how higher rates are impacting the economic and inflation outlook.”

But the report added, “However, in the Bank’s recent communications, it has very clearly left the door open for more aggressive tightening should the current torrid pace of economic growth continue.”

The BCREA pointed out that the posted five-year qualifying rate has risen in response to the BoC’s first overnight rate hike. It said, “After the July interest rate hike, markets widely expected at least one additional rate increase in the fall, and so bond markets and lenders had already priced in the September increase by the time it occurred.”

It predicted that rising bond yields would result in further increases in the five-year posted rate and the average discounted five-year mortgage rate.

BCREA September Forecast

 

The report added that the rising posted five-year qualifying rate is “an interesting development, because it is the first increase in the posted rate since stricter qualifying rules for insured mortgages were imposed last fall.”

The BCREA concluded, “Our baseline forecast is for gradual rate increases over the next two years, with the Bank of Canada’s overnight rate ending 2018 at 1.5 per cent.”

Read the BCREA’s full Mortgage Rate Forecast for September 2017.

Joannah Connolly
Joannah Connolly is editorial director of Glacier Real Estate, Glacier Media's real estate division. Joannah writes and curates real estate news for Glacier Media's local newspaper websites, including the Vancouver Courier, North Shore News, Burnaby Now, Tri-City News and others. She also oversees editorial content in Real Estate Weekly Homes, West Coast Condo, Western Investor and Glacier's special real estate publications. A dual Canadian-British citizen, Joannah has 22 years of journalism and editing experience in Vancouver and London, with a background in construction, architecture, healthcare and business media. Joannah has appeared on major local TV outlets as a real estate commentator, has moderated and spoken on various industry panels, and spent two years hosting the Real Estate Therapist radio show on Roundhouse Radio.