Posted in Bank of canada rates, BC Mortgages, Best Rate Mortgages, British Columbia Mortgages, Canadian Housing Market - Lisa Alentejano, Canadian Mortgage News, Fixed rates, Kamloops home mortgages, Kamloops Mortgage Broker, Kelowna Mortgage Broker, Low Interest Rates, Mortgage Affordability, Mortgage Rates, Refinance Your Mortgage, Save your money, Variable rates

Where do we go after hitting bottom?

Where do we go after hitting rock bottom
Where do we go after hitting rock bottom


A great article from the British Columbia Real Estate Associations Economists, Cameron Muir and Bryan Yu.  We are all enjoying a low interest rate playing field currently but we can’t expect them to remain this way indefinately.  Read on and learn what economists are predicting for 2010.




Consider it one of the few positives floating in a sea of negatives during the current recession.  In a period beset by job losses, drops in home prices and lower consumer confidence, mortgage borrowing costs have dropped precipitously for buyers and owners.  This has fueled a modest uptick in home ownership demand from early year lows and provided opportunity for some current owners to refinance at lower rates.

Since the end of April, posted mortgage rates have settled at decades low levels-precluding any discounts often offered by lenders to clients with preferred credit histories.  The one-year borrowing costs on a fixed term mortgage fell to 3.9 per cent at the end of April, marking a 170 basis point (bps) decline since the end of 2008.  The five year fixed term mortgage rate fell to 5.25 per cent, down from 6.5 per cent during the same period.  These rock-bottom mortgage rates should move up in the quarters ahead – particularly for longer fixed term mortgages.

Existing households and new buyers with variable rate mortgages should see their borrowing rate remain flat until the second quarter of 2010.  BCREA forecast a .75 percentage point increase through 2010 as prime rate rise to meet changes in the Bank of Canada’s (BOC) target overnight rate.  The BOC kept its target for the overnight rate at .25 per cent on June 4 after lowering it by a cumulative 425 basis points (bps)  since December 2007 in a bid to spur economic activity during a deepening recession.  The BOC stated that the target overnight rate would likely stay at this level until the end of the second quarter in 2010, conditional on its inflation outlook.  BCREA forecasts a cumulative rate increase of 75 bps by the end of 2010 as economic prospects improve and global interest rates rise from record lows. 

Fixed term mortgage rates, which move closely with bond yield and deposit rates of similar maturity are expected to edge up this year and next but remain near record lows by historical standards.  Longer term bond yields have risen quickly since the first quarter of 2009 despite low short term rates, suggesting that the market expects higher inflation and interest rates in 2010.  However, BCREA forecasts a more modest rise in fixed term mortgage rates over the next two years as higher inflation expectations are tempered by a slower than expected economic recovery, an elevated Canadian dollar and weaker labour markets.



2009                     Q1           Q2E         Q3F          Q4                                                              

1-year                   4.93        3.98        3.90        4.00                                                       

5-year                   5.93        5.45        5.90        6.00              

2010                       Q1            Q2             Q3          Q4

1-year                    4.25        4.40        4.50        4.50

5- year                  6.10        6.25        6.25        6.35



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