10-year mortgage at 1.99 per cent pitched
December 30, 2020
The Bank of Canada's next scheduled rate announcement is January 20, 2021. Most forecasters expect the target rate to remain at 0.25 per cent through to the end of 2022.
So how low can mortgage rates go?
On December 21, a handful of Canadian mortgage brokers started advertising a 1.99 per cent for 10-year fixed-rate mortgages—breaking Tangerine’s prior record of 2.14 per cent. The move came after mortgage finance company CMLS Financial launched a new 10-year promotion in the broker channel.
The lowest 10-year mortgage rate in history comes with some caveats. It is restricted to new mortgage borrowers with at least a 35 per cent down payment, but is an indication that ultra low-cost mortgages have become a fixture in Canada’s housing market.
A survey of economists in December pointed to a belief that the Bank of Canada will keep its target rate at the “effective lower bound” of 0.25 per cent until the second half of 2022.
Royal Bank is the only forecaster calling for a rise in the target rate by September 2022.
While low rates are helpful for homebuyers, the expectation of prolonged low interest rates is also an indication that the economy will likely not recover until late 2022.
The Bank of Canada has said that it will hold the policy interest rate at 0.25 per cent until the economy recovers, the labour market tightens, and inflation reaches a consistent 2 percent. The last time these actions were taken was during the 2008 financial crisis.