Read September 2022 Canada interest rate forecast
Read November 2022 Canada interest rate forecast

What’s next for mortgage rates? Here’s how the economy is looking:

With at least a moderate recession all but confirmed for the Canadian economy, the housing market is set to continue its 2022 cool, as the Bank of Canada eyes more rate hikes before the end of the year. For home-buyers now may represent an opportunity after years of sky-rocketing home values, but borrowers should spend the time to research rates and ensure they can afford a mortgage with future rate increases in mind.

Mortgage rates continue to rise as the market cools.

For the month of October, expect that variable rates may increase slightly as the Bank of Canada continues to increase its overnight lending rate, fixed rates will remain at similar levels for the most part, and monoline lenders will continue leading the way with lower rate offerings to consumers. Historically, sales activity begins to decline in October, November and December, in part, due to lower inventory and consumer demand.

What’s next for the Bank of Canada?

There are two more Bank of Canada rate announcements for 2022, all eyes will be on the October 19 CPI numbers and October 26 Bank of Canada meeting.

We’re expecting the BoC to raise its overnight rate by a total of 25 to 50 total basis by the end of 2022.

The economy continues its trend.

Economists continue to expect soaring food, energy, interest rates and the ongoing labor shortages to push the economy into a moderate recession in 2023, which the Canadian economy is estimated to recover from in 2024. Global factors are at play here as the Russian and Ukraine conflict disrupts global wheat supply, energy costs and cause supply chain constraints which are affecting us slightly here at home.

Labour shortages continue to be the trend for 2022. According to Stats Canada, there is an average of 1.1 unemployed people for each job vacancy in Canada in the second quarter, down from 1.3 in the first quarter, and from 2.3 in the second quarter of 2021. The lower the ratio, the tighter the labour market, as it indicates a smaller pool of applicants for each role, thus indicating further labour shortages. BC and Quebec lead the way with the tightest labour market at .8 unemployed for each job vacancy.

In Q2, Canada’s population grew by the fastest rate in 55 years at .7%, an increase of 284,982 migrants, asylum claimants and permit holders, as well as people affected by the Russian and Ukraine conflict. While population growth via immigration is necessary to supplement Canada’s shortage of skilled labourers and aging work force, an increase at this rate could prove problematic for a country already suffering from a shortage of housing supply, thus causing increased competition in the rental market and higher rent costs.

Bond yields have been trending upward as they bounced from July levels, the Canada 5 year Bond Yield is now near the ceiling previously set in June, the market has already priced in this increase, and since most Lenders didn’t move to lower their fixed rates during the brief downward trend, we see no major incoming increases to fixed rates in the near term.

Consumer price index (CPI) for the month of August came in at 7%, a decline of 1.1% from June’s high, and .6% lower than July. The CPI for the month of August excluding gasoline is 6.3%, down from 6.6% in the previous month, we’re also seeing a slow down in four major categories, a positive sign for consumers. While Canadians today are still experiencing some of the highest cost of food, shelter and traveling, we will continue to see a soft downward trend in inflation as global supply chains bottle necks are resolved.

The best mortgage rates in Canada, right now:

Our current best 5-year fixed rates are 4.77% and 5-year variable rate of 4.30%.

For first-time home buyers, there are some great opportunities in a market dampened by negative sentiment and overall lack of competition.

For homeowners who are coming up for renewal, continue to monitor our rate forecasts, it would be wise to renew into a discounted 1-year term until rates begin to dramatically decrease in the coming year.

For homeowners who would like to see the benefit of switching lenders and breaking their mortgage early, Perch automatically calculates the net benefit once you input your existing property and mortgage details in your Perch portfolio.

Is it time to renew your mortgage?

If you’ve got your mortgage renewal coming up, stay tuned for future rate hikes. We recommend using Perch Pathfinder to view and compare offers from 30+ mortgage lenders to find the best deal. For homeowners who want to see the benefit of switching lenders and breaking their mortgage early, Perch automatically calculates the net benefit once you input your existing property and mortgage details.

Welcome to homeownership, simplified. Buy the right property sooner, find your mortgage and build wealth through real estate with Perch. Visit www.myperch.io to learn more, or apply today.