Monday Mortgage Update: July 16, 2012

Alyssa Furtado
by Alyssa Furtado July 16, 2012 / No Comments

Interest Rate Forcast

Tomorrow, July 17th, the Bank of Canada (BoC) will make its fifth scheduled key interest rate announcement of 2012. Most industry experts are predicting the central bank will leave the key interest rate, also known as the overnight rate, at 1.00% where it has been for almost two years. Due to global economic turbulence, many economists have pushed back their forecasts for the first rate increase to the middle of next year.

“Almost every major central bank in the world…has eased in some way, and that makes Canada look like a bit of an island talking about raising rates, even if they have no intention of doing it anytime soon.” – BMO chief economist Doug Porter

C.D. Howe Institute’s Monetary Policy Council (MPC), which includes chief economists from some of Canada’s major financial institutions and highly-regarded University professors, recommended that the central bank maintain its 1.00% target overnight rate at tomorrow’s announcement. The MPC then called for the BoC to raise the overnight rate to 1.50% by July 2013. The Council voiced, “That domestic demand looked robust, but weakness in the United States and abroad would hurt Canadian growth more than [it] appeared six weeks ago.” [1]

The key interest rate is relevant to Canadian home owners because it drives mortgage interest rates in Canada. For example, an increase in variable mortgage rates will follow after an increase to the key interest rate.

Mortgage Rate Recap

Last week, several financial institutions lowered their mortgage rate offerings. Both TD and RBC, two of Canada’s largest banks, dropped their 1-year and 2-year fixed rates.

TD Bank mortgage rates

Rate Type

Previous Rate

Current Rate

Change in basis points

1-year fixed rate

3.20%

3.10%

Decrease of 10 bps

2-year fixed rate

3.55%

3.35%

Decrease of 20 bps

RBC mortgage rates

Rate Type

Previous Rate

Current Rate

Change in basis points

1-year fixed rate

3.20%

3.10%

Decrease of 10 bps

2-year fixed rate

3.55%

3.35%

Decrease of 20 bps


Where are Canada Mortgage Rates this week?

A history of weekly 5-year fixed mortgage rates and 5-year variable mortgage rates

Canadian Mortgage Rates in 2012

Note:  This is simply a small sample size and does not represent the entire market. It does, however, offer some useful insight.

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[1]  C.D. Howe Institute