Mortgage rates to increase sooner than expected
The future of mortgage rates
REP
Interest rates are expected to increase sooner than originally expected.
“With economic growth coming in strong this year, inflation should turn the corner,” TD Bank said in its Quarterly Economic Forecast. “The Bank of Canada will look for confirmation, but is now expected to begin increasing its policy interest rate in October of this year, two quarters earlier than previously anticipated.”
Variable mortgage rates are largely dependent on the Bank of Canada’s benchmark rate; when it increases, expect variable rates to as well.
Canada saw strong first-quarter momentum with economic growth of 2.8%. That signifies a 0.5% upgrade from the previous forecast.
A more moderate 1.9% growth is expected in 2018.
Most recently, the Bank of Canada held its benchmark rate at 0.5%.
“The Canadian economy’s adjustment to lower oil prices is largely complete and recent economic data have been encouraging, including indicators of business investment. Consumer spending and the housing sector continue to be robust on the back of an improving labour market, and these are becoming more broadly based across regions,” the BoC said at the time. “Macroprudential and other policy measures, while contributing to more sustainable debt profiles, have yet to have a substantial cooling effect on housing markets.
“Meanwhile, export growth remains subdued, as anticipated in the April MPR, in the face of ongoing competitiveness challenges,” it continued. “The Bank’s monitoring of the economic data suggests that very strong growth in the first quarter will be followed by some moderation in the second quarter.”
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