Interest Rate Forecast
Despite the Bank of Canada’s continued warning that interest rates should rise in the next couple of years, it is now suggesting that a move is “less imminent” due to slower household credit growth. According to BMO: “Modest growth, below-target inflation (0.8% in December), tighter credit rules, easy Fed policy, and a strong loonie argue against a rate hike. We expect the overnight rate to stay at 1% until the spring of 2014, before rising gradually to a more neutral 3½ % in 2016.” Likewise the bank’s forecast for bond yields is a rise of 100 to 150bps over the next 18-24 months.
This indicates that barring a shock to the system, 5-year money for commercial mortgages will continue to be readily available at near historic lows in the near term, with spreads of 200 to 200 basis points coming in around or under 4.00%.
Source: Bank of Canada
Well, I think that housing is Canada is relatively affordable today. Interest rates on mortgages are reasonable and consumers can buy property. But on the other hand, today’s economy is very unstable and it’s hard to foresee how high interest rates will be in a couple years. The same is about consumers, some feel financially confident today but there’s no guarantee that there will not come a day they will have to use online financial services to get some money. That’s why it’s necessary to build savings and think twice before applying for a mortgage.