What’s up – mortgage rates are rising
Hope you are having a good start to the new year.
Just an update on a few things that are impacting the market for real estate and financing.
First, there continues to be pressure on fixed rates to rise. We have seen rates rise this year and current rates in the low 3% range. We will see more increases in the upcoming weeks.
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We are encouraging clients to secure a rate hold for 120 days while they look for a new property. We can lock in any term.
Variable rates continue to remain low and we can also lock in a rate hold for the 5 year variable mortgage as well.
Second, our Dominion Lending Chief Economist, Dr Sherry Cooper shared her insights last month after the Bank of Canada announced no increase to the overnight lending rate. We will talk with her again on March 2nd after the Bank of Canada meets again. A rate increase to the overnight lending rate is expected this week and that in turn will shift the Prime rate up from it’s current level of 2.45%. That shift will have an impact on variable rate mortgages.
A summary of the comments from Dr Sherry Cooper in January 2022 are below. To review the full 60 minute discussion check out https://channel.dominionintranet.ca/category/vimeo/1955822
*Canada is back to full employment. Some gaps and shortages remain but it is expected immigration in 2022 may offset some of that in certain areas
*New permanent residents in 2021 was 400,000 people but most of them already lived in Canada (temporary work permits, students, etc)
*New permanent residents moving ahead will be about the same or higher
*Inflation is 4.8% which is reasonable considering major contributing factor is housing. Inflation continues to rise in February
*There was no reason to expect the Bank of Canada to increase the overnight lending rate in January as the housing issue is due to supply shortage. An increase in supply of housing continues to be an issue and should be a priority for provincial and municipal governments especially in Toronto and Canada
*The Federal Government will now move from quantitative easing measures they implemented in March 2020 (major buying of bonds) to selling off the bonds back into the market. This may have an impact on fixed rates and a controlled measure will be important to avoid a stall in the economy and a recession.
Although Dr Sherry didn’t predict specific rates there was an implied mention of the overnight lending rate landing about 1.75% in 2022 and with a historic spread of 2.2% between overnight and prime rate that could result in a Prime Lending Rate of 3.95% (same as March 2020). Fixed rates are tracking for 3.09%+ this year (same as March 2020) but that will depend on the sell-off of bonds by the Feds.
If I can be of any assistance to pre-qualify you for a purchase and secure a rate hold please reach out.
If I can be of assistance to help you with options for a refinance or early renewal of your mortgage I am here to help.
Cheers
Pauline Tonkin
Blue Tree Mortgages West
C: 604 813 8402 pauline@mybcmortgage.ca