4 April 2011
If these forecasts are correct, the next BoC rate hike will be on July 19. In the same time the overnight index swap dealers say there won’t be any hikes until September 7.
On the whole, the major analysts now predict a 175bps (1.75%) increase in the overnight rate during the next 21 months. If it’s true the prime rate can be 4.75% by the end of 2012. Today it’s only 3.00%. The 10-year average prime is 4.40%.
Today’s best discount is prime – 0.80%. It means that if the economists are right, the 5-year variable rates will be about 3.95% by year-end of 2012.
5-Year Government Bond Yields
Government bond yields influence fixed mortgage rates.
|Chg vs Today||+0.53
(Unfortunately, CIBC’s forecast was not available).
The major banks expect the 5-year bond yields to climb 99bps (0.99%) during the next 21 months. In this case the 5-year yield will be 3.78% by the end of the next year. That’s why by the year-end 2012 the discounted 5-year fixed rates could rise to 4.86% approximately.
Such banks spend a lot of money to make accurate rate forecasts. Their economists analyze information from different sources, academic studies and historical data. But their predictions are still not perfect.
These forecasts are made by the banks and can be changed due to certain factors. Please check their January forecast. It’s absolutely necessary to consult your mortgage broker before making any decisions.