My thoughts on where the prices will be by the end of 2022 

There is always a question about the mortgage rate for forecast. It makes perfect sense because we built True Mortgage as a broker that can provide clients with access to the lowest rates and a simple, fast service to launch. I’m proud of how dissatisfied many of our competitors are with us, and I’m indeed hearing from them. 

This is my mortgage rate for forecast. 

I agree with some predictions that the Bank of Canada (BoC) will raise night mortgage rates by at least 100 basis points (bps) by the end of 2022. 

The announcement on July 13 will add another 50 basis points, with at least two of the remaining three dates in 2022 expected to increase by 25 basis points. (Note: Percentage points have 100 bps.) 

This will bring the BoC rate to 2.5% by the end of the fourth quarter of 2022. This is within the neutral range of 2-3% of the target (it cannot stimulate or weaken the economy at this pace). 

And that means a base interest rate of about 4.7%, excluding floating rate rebates that lenders like us may be offering. It is speculated that neutral interest rates need to be raised even higher (3% by the first quarter of 2023) before the central bank can take a break. Of course, if spending and rising inflation take too long to be in control, it’s possible. 

But I think everyone is already worried that the domino effect of rising interest rates on home prices and borrowing costs will put everyone in recession, not to mention the expectation that inflation will have a significant impact on consumer pockets. The central bank will want to look around and measure the effect before making further hikes automatically. 

Will the fixed-rate reach 6% next year or two years? 

In most cases, fixed rates have already been raised to meet the central bank’s expectations of interest rate fluctuations. With the current highest fixed rate around 4%, the neutral BoC rate may exceed 4.5% if it settles at about 3%.

It’s easy to feel panic or anxiety when the pace starts to rise, but it’s unlikely that your card will contain a fixed rate of up to 6% in this cycle. The rapid rise in interest rates can significantly restrain borrowing and spending, curbing demand and allowing Canadians to make very prudent decisions about spending money and paying off debt. 

Once the interest rate peaks, we expect it to fall a bit until we ride this wave of considerable economic fluctuations and eventually reach a more balanced market and a shore of low inflation.

Will the Bank of Canada suspend rate hikes in the first quarter of 2023? 

That’s what BoC and financial experts predicted. There is pressure to continue hiking over the next few months to curb inflation as quickly as possible, and it hit a 31-year high in May. Many want to suspend at an acceptable neutral interest rate in the first quarter of 2023. 

Is this pace of rate hikes enough to curb Canada’s spending and mild inflation in the storm (although these recent rate hikes are still going on)? 

Will the insatiable demand for commodities subside, or will supply delays catch up? Will the unemployment rate rise? If all the answers are yes, the BoC can pause at any time and consider a softer approach to halting the recession. But it will be a game to wait to see how the market reacts to the new interest rate environment. 

Finally, do you think these higher interest rates will lower home prices? 

If interest rates go up, house prices should go down. Prices have already fallen in some areas, sales should cool, and inventories should return to a more balanced state. 

Interest rates have become a marginal factor affecting housing in recent years, and increasing household income usually pushes up house prices and inflation. This time it was a pandemic crash to buy a house that sent prices to the stratosphere with unprecedented low-interest rates. It’s not surprising that home prices can plummet as rate hikes try to readjust the market. 

A low number of properties due to still high-stress test rates may also encourage sellers to reassess their pricing strategies sooner than expected.

How far will home prices go down? I will wait again. Due to unusual pandemic activity, it is impractical to compare house prices with January 2022. Even if it drops by 15%, it will still be high on the past timeline. 

Mortgage rates for forecast transactions are slowing. 

Regarding the home market, we can’t keep up with the pace of home buying we’ve witnessed in the last few years. Who moved immediately or hurriedly became the first purchaser? As this activity is unlikely to repeat itself anytime soon, Canadians expect to settle into a more typical buying pace. This is seen in real-time. 

Still want to move on a regular course or buy their own home. And we are here to help them do it.