Will Canada Mortgage Rates Go Down for the Remainder of 2022?
July 28, 2022 | Posted by: Ron Chan
From Bloomberg to CNN, news outlets across the border are reporting sharp drops in mortgage rates. Some haven't seen levels so low since the 2008 recession. The fall is the result of a growing fear that the US economy is entering a recession. Is Canada headed for one too? If so, will mortgage rates also fall? Subsequently (and for the sake of our audience) should prospective home buyers wait to capitalize on a potential lowering of variable and/or fixed mortgage rates? Not so fast, folks. Here's why.
Why Homebuyers Should Not Wait for Mortgage Rates to Fall for the Remainder of 2022
Canada is Not in the Same Boat as the USA
While not without challenges (inflation, etc.) Canada is not showing the same signs of a deep recession as our neighbors south of the border.
For one, fears about joblessness leads to a loss of economic confidence which spurs on a recession. This is not happening in Canada. At press, Canada is enjoying the lowest unemployment rate in history. While this may change in 2023 as workers flee other countries to fill vacancies in Canada, it is not expected to change in 2022. This helps maintain economic confidence (despite inflation) which indirectly keeps mortgage rates at a higher level. Another indicator that we're in the clear from a US-feared level of recession is housing prices and sales. They typically drop, and drop fast. This isn't happening in Winnipeg Manitoba where home values and sales remain strong. Last month, the Manitoba Real Estate Association (MREA) reported home sales in the province increased by 5.4% month-over-month.
While there is no certainty as to what 2023 holds, variable and fixed mortgage rates will not fall as they did in 2020-21 for the remainder of the annum. They will either persist at stable levels or rise. If you're in the market for a home, don't wait. If the latter occurs (rates rise) you'll wish you acted now at the mid-summer juncture of 2022. Get pre-approved.
The Bank of Canada Will Most Likely Raise the Prime Rate Again
Earlier this month, the Bank of Canada increased the prime rate by a full 1-percentage point. This is the largest overnight increase since 1998 and has caused variable rates to rise, even though they remain favorable when compared to much of recent history. The Bank of Canada has not given any indication that they will reduce the prime rate after increasing it over the last three periods in a row. In fact, we can say with relative certainty that the prime rate will not decrease in 2022. It will either stay the same, or rise further (more likely) with variable mortgage rates following suit. Fixed mortgages rates are also likely to climb as the Bank of Canada continues to tighten quantitive easing. They may put themselves in a position to drop the prime rate in 2023, but for the rest of this annum don't bank on it. Therefore, the longer you wait to get pre-approved on a mortgage, the more you may have to pay.
Will Canada mortgage rates go down for the remainder of 2022? Not likely. If located in the Greater Winnipeg area, schedule a consultation with mortgage broker Ron Chan today to learn more.