Mortgage Rate Forecast - Low Rates to Continue

Low interest rates were a big reason why the real estate boom lasted as long as it did. And, the good news is, they have not changed much. Buyers now have a lot of listings to choose from and can still take advantage of low interest rates. Canada Mortgage and Housing Corp. predicts interest rates will likely remain within 25 to 50 basis points of their current levels into the first half of 2009. It says that rising bond yields may push rates marginally higher during the last six months of 2009. CMHC forecasts that the one-year posted mortgage rate will be in the 6.00 to 6.75 per cent range, and that five-year posted mortgage rates will be in the 6.50 to 7.25 per cent range. As you see on the chart, those rates are very low by historic levels.

A recent survey by the Canadian Association of Accredited Mortgage Professionals (CAAMP) says that borrowers who took out five-year, fixed-rate mortgages during the last year had an average interest rate of 5.59 per cent. Advertised rates during the same period averaged 7.18 per cent, showing that borrowers were able to negotiate an average discount of 1.59 per cent below advertised rates.

Half of the mortgages taken out during the last year were for amortizations longer than 25 years. Longer amortization mortgages account for 16 per cent of all outstanding mortgages. CAAMP says that most people were not aware that the government recently introduced stricter regulations on insured mortgages, but that once the changes were explained, 60 per cent supported the changes.
The CAAMP says 66 per cent of mortgages are fixed, but "there has been a pronounced shift towards variable rate and adjustable rate mortgages." The market share for these kinds of mortgages almost doubled during the last year, which suggests that consumers may be expecting interest rates to go down. CAAMP says that 84 per cent of the people surveyed are satisfied with their mortgages.

Source: Clear Communications Newsletter