Canada Mortgage Rates - What is in Store For 2010-2011?

The last few years have been turbulent times for investors. Unlike the U.S. and other nations, the Canadian housing market held steady and has been experiencing strength through 2010.

Record home sales in the first quarter of 2010, are considered to be due to a combination of factors. Pent up demand, low inventory levels and historically low Canada mortgage rates were a potent combination of market drivers. As the housing market becomes more balanced, with more housing inventory becoming available, prices should stabilize and grow at a much slower rate. In Ontario and British Columbia, many homebuyers also rushed to beat the incoming HST tax.

What does the future hold in store for the Canadian housing market? Home prices are not expected to appreciate as much as they did in the first half of 2010. Therefore, buyers may find that the more reasonable listing prices, coupled with fewer buyers rushing in to make bids or multiple offers, will mean better value for their real estate dollar. The slight increase in mortgage rates over the second half of the year should not affect the affordability if money was saved buying the home.

Although it is impossible to exactly predict what will happen with the Canadian economy and interest rates, the general consensus among all the major banks is that variable and fixed interest rates will rise over the next 19 months. The amount the overnight rate will rise is a matter of debate. Some banks, like the CIBC, predict that the overnight rate will be 2.5% by the end of 2011. Other banks predict the rates will go even higher. The Royal Bank of Canada and the Toronto Dominion bank predicts the overnight rate will rise to 3.5%. Most other main banks predict somewhere in between, with an average forecast of 3.17%.

Of course, these are only predictions and can change. The speed and strength of the economic recovery, along with global factors, will influence lending rates and monetary policy.

Whenever the time is right for you to buy, choosing the right lender can save you thousands over the term of your mortgage. Choose a qualified mortgage broker who can shop your mortgage over many lenders to save you money and find the best mortgage rate in Canada.

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