Mortgage Rate Outlook

On April 12th, the Bank of Canada

announced that it was leaving the

Target for the Overnight Rate

unchanged at 1.0 per cent. The last

increase in the overnight rate

occurred on September 8, 2010 when

the Bank of Canada raised it by 25

basis points. The Bank of Canada is

expected to resume raising the

overnight rate in the fourth quarter of

2011. Mortgage rates, particularly

short term mortgage rates and

variable mortgage rates, are expected

to remain at historically low levels.

According to CMHC’s base case

scenario, posted mortgage rates will

remain relatively flat in 2011 before

increasing moderately in 2012. For

2011, the one-year posted mortgage

rate is assumed to be in the 3.1 to 3.5

per cent range, while three and

five-year posted mortgage rates are

forecast to be in the 4.1 to 5.6 per

cent range. For 2012, the one-year

posted mortgage

rate is assumed to

be in the 3.4 to 4.3 per cent range,

while three and five-year posted

mortgage rates are forecast to be in

the 4.2 to 6.3 per cent range.

Rates could, however, increase at a

faster pace if the economy ends up

recovering more quickly than

presently anticipated. Conversely, rate

increases could be more muted if the

economic recovery is more modest in

nature.

Source: CMHC