2023 OUTLOOK: WHat can we expect with mortgage rates?

​#overnight     #rate cut     #payments     #variable     #term     #rate hikes     #policy     #bond market     #home prices     #recession  
  
While many homeowners' monthly mortgage payments on adjustable-rate mortgages and lines of credit are increasing by hundreds of dollars per month, some industry analysts think that time is running out on interest rate increases.

With rampant inflation and higher rates bleeding through to 2023, it is expected that variable-rate and fixed-rate mortgages will continue to remain unattractive in the short term.

BCREA believes that five-year fixed rates have already peaked at the current 5.5 percent average, and that rates are expected to start falling early in 2023, ending at 5.05 percent at the tail-end of 2023. Mortgage rates are expected to increase through 2023, but they are equally likely to start falling if the Bank of Canada (BoC) hits their inflation targets earlier.    

CIBC analysts project that the Bank of Canada will keep rates at the higher levels through 2023, slowing demand and allowing inflation to hit its 2 per cent target. 

Looking forward at the end of 2023 and through 2024, analysts are penciling in an early rate cut from the Bank of Canada, which could bring national benchmark prices back below the 3.00% mark before 2024. If the bond markets predictions are right, though, our central bank would be signalling a rate cut before year-end 2023.  

The Bank of Canada is expected to start cutting its policy rate in response to significant economic slowdowns or a recession, beginning in the second half of 2023. The BoC has also said that it will hold off on cutting its overnight rate until Canada's economy has recovered and inflation has reached about 2%.

Long-term rates could reach lower levels by late 2023 in both Canada and the United States, because markets are starting to price in modest central bank policy rate cuts for 2024, and forecasting inflation will stabilize and decrease. 

Currently, the Canadian 5-year bond yield is priced to expect another 0.75 percent hike by the Bank of Canadas interest rates in early 2023.  That means that some homeowners, who are seeing a big jump in mortgage payments, may have to either refinance their homes or list them for sale. It can take 1-2 years for inflation to tame, according to BoC, so holding onto a short-term fixed-rate mortgage might be a good bet, but you might then end up having to re-lock in as rates will not be at their lowest.    

Cited Sources

• https://www.mortgagesandbox.com/mortgage-interest-rate-forecast 0
• https://www.nesto.ca/mortgage-basics/mortgage-rates-forecast-canada-2023/ 1
• https://myperch.io/canada-interest-rate-forecast/ 2
• https://www.theglobeandmail.com/investing/personal-finance/household-finances/article-mortgage-market-predictions-2023/ 3
• https://www.canadianmortgagetrends.com/2022/12/2023-housing-and-interest-rate-forecasts/ 4
• https://storeys.com/what-to-expect-canadian-real-estate-2023/ 5
• https://canadatoday.news/on/will-the-bank-of-canada-hike-mortgage-rates-again-in-2023-heres-what-industry-experts-are-predicting-2-169394/ 6
• https://dailyhive.com/vancouver/canada-mortgage-rate-forecast-2023 7
• https://globalnews.ca/news/9370291/canada-housing-market-outlook-2023/ 8