It predicts when the first Bank of Canada rate increase will take place…
The Bank of Canada will likely increase its overnight rate by 0.5% to 1% over the course of 2022, according to a new forecast by Ratehub.ca.
The online financial platform projected the first BoC rate increase for Q2, “followed by one to three more rate increases by the end of year,” it said.
An almost immediate effect of this pace will be a 3% to 7% gain in housing prices. Immigration and inflation will be other major contributors to this growth, Ratehub said.
“First-time home buyers will increase their reliance on the bank of mom and dad for the down payment to purchase their new home,” Ratehub said. “With prices continuing to rise, new buyers will be even more dependent on help from family.”
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Fixed rates are expected to finish 2022 at a higher level than what they were before the pandemic. Ratehub said.
“Increases to bond yields will push fixed rates higher than what they were in February 2020,” Ratehub said. “Posted five-year fixed rates from the [largest] banks will rise high enough, such that the stress test will move above its floor of 5.25%. The regulators set a minimum of 5.25% for the stress test in 2021, but it won’t matter by the end of 2022 because the stress test will be higher than the minimum.”
Ratehub also expressed skepticism over the government’s ability to moderate the market heat.
“The only part of the Liberals’ extensive housing platform that will be put in place is the reduction of CMHC mortgage insurance rates,” Ratehub said.
The Crown corporation’s mortgage insurance rates are projected to see a 25% cut, while the insured mortgage cut-off is expected to rise from $1 million to $1.25 million, Ratehub said.
