Interest Rate Forecast For 2017

Interest Rate Forecast For 2017

Interest rates forecast for 2017  Hit bottom last year

Mortgage interest rates have been at historically low levels for the last decade, but some observers think they hit bottom in 2016 and are poised to rise.

A report by RBC Economics explains, “The spike in Canadian bond yields following the surprise election of Donald Trump as U.S. president and attendant upward pressure on U.S. bond yields has prompted a number of financial institutions to raise certain mortgage rates since early November.  We expect bond yields to rise materially further this year amid a tightening of monetary policy in the United States, which is bound to keep fixed mortgage rates on an upward trajectory in Canada.”

A forecast by the Canadian Real Estate Association notes that “tightened mortgage regulations and lending guidelines are also expected to increase capital costs for lenders, resulting in modest increases in mortgage interest rates.”  The association found that mortgage rate discounting is widespread in Canada.  In 2016, the average actual rate for five-year fixed mortgages (2.72 percent) was 1.94 percentage points lower than the posted rates, which averaged 4.66 percent.  Fixed-rate mortgages are favoured by 80 percent of homeowners, with 17 percent holding adjustable rate mortgages.  The survey also indicates that 84 percent of mortgages have amortization rates of 25 years or less.

Although rates are creeping up and we may not see the rock-bottom deals that were available last year, you can still get a great mortgage rate.  A Mortgage Professional Canada survey conducted last Fall discovered that the average mortgage rate is 3.02 percent.  For mortgages purchased during 2016, the average rate is 2.76 percent.

“Canadians are highly motivated to repay their mortgages as quickly as possible and these surveys find consistently that each year more than a third of mortgage holders take actions that will shorten their amortization periods,” notes the mortgage association.

The survey confirms that the rate of mortgage arrears in Canada is just 0.28 percent “which is close to the lows seen before the recession.” Source – Real Estate Update

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Phone: 905-409-6730
Dated: May 1st 2017
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