Variable Mortgage Rate Forecast – August 2012

Flat Rate Forecast

The Bank of Canada (the “Bank”) sets the overnight lending rate which directly impacts the mortgage prime rate.  Although the Bank has a broader agenda than just controlling the mortgage prime rate, this motive has been in the spotlight due to the Bank’s desire to deleverage Canadian borrowers.  Despite some upward rate pressure to cool the housing market there has been no change to the prime mortgage rate all year.  Interest rates have remained flat primarily to keep our dollar’s value in check.

The Bank of Canada last met to review interest rates on July 17th and will meet again on September 5th.  The long term expectation is for variable mortgage rates to remain steady through 2013 and nothing has changed internationally to suggest that mortgage rates will increase any sooner.  Domestically, mortgage rule tightening and a cooling housing market has taken away any upward pressure on mortgage rates.

The short and mid-term variable mortgage rate forecasts remain flat.  If you currently hold a variable mortgage rate then you’re in a good position to hold steady and enjoy the ride.  If you are considering a new mortgage then a variable mortgage rate is a good option if you can get a substantial discount from the fixed mortgage rate equivalent.

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