Mortgage rates are expected to remain within 25 to 75 basis points of their current level for the remainder of 2009, according to CMHC’s second quarter Housing Market Outlook, keeping them “very low in a historical context.”
“Movements in mortgage rates are difficult to predict due to volatile economic conditions,” the report stated. “Nevertheless, rates are expected to remain steady this year and edge higher in 2010.”
Along with mortgage rates, CMHC listed employment, net migration and low birth rate as having key effects on residential construction, and forecast housing starts to decline to 141,900 in 2009 (most notably in Alberta and Saskatchewan) before rebounding to 150,300 in 2010.
“The decline in housing starts in 2009 can be attributed to several factors, including the current economic climate, increased competition from the existing home market, and the impact of strong house price growth between 2002 and 2007,” said CMHC chief economist Bob Dugan. “Housing market activity will begin to strengthen in 2010 as the Canadian economy recovers, bringing housing starts more in line with demographic fundamentals over the forecast period.”