For the past few weeks, invested parties have speculated on a potential Bank of Canada qualifying rate increase, from 4.64%, where it stands today, to 4.74%. Market News: Qualifying Rate and Mortgage Rate t Increase in 2018
For the time being, the British Columbia Real Estate Association is predicting that no change will occur until the first quarter of 2018.
BCREA’s chief economist Cameron Muir wrote in his latest Mortgage Rate Forecast Report: “While the likelihood of the Bank raising its target rate by the end of 2017 has certainly increased, we still expect the Bank to hold off until early 2018, particularly if oil prices remain low and inflation fails to pick up.”
Meanwhile, the average five-year mortgage rate is expected to jump from its current 2.61% to 2.79% in the third quarter of 2017. In Q4 of 207 it is expected to rise further to 3.05%, and then 3.05% in the first quarter of 2018. Finally in the last quarter of 2018, the qualifying rate is predicted to hit 4.84%, and the average 5 year mortgage rate is expected to reach 3.35%.
This news may delay the plans for some buyers purchasing a home in 2018, but it is a good sign for the overall economic condition of Canada.
In the same report, Cameron Muir states: “The Canadian economy has finally returned to good health following the rapid and dramatic decline of oil prices in late 2014 and the consequences of wildfires in Alberta last year. Since the third quarter of 2016, the Canadian economy has expanded at an average rate of 3.5 per cent, well above the Bank of Canada’s estimate of 1.7 per cent sustainable long-run growth. After posting nearly 4 per cent growth in the first quarter of this year, we expect that real GDP growth will slow slightly to around 2.4 per cent in the second quarter with the economy ultimately growing 2.5 per cent this year and 2 per cent in 2018.”