While the benchmark qualifying rate
for Canadian mortgages has not changed in the
past eight months, offered or discounted mortgage rates at banks
and by other lenders
have recently moved higher. The
average 5-year rate offered by lenders has increased by about
20 basis points in recent weeks to 2.79 per cent and
the discount from prime
lending rates on variable rate
mortgages has narrowed from 60 to 40 basis points.
These increases are largely due to regulatory and other market
structure changes that are pushing the bank's cost of
capital higher.
While these recent increases are
likely one-time adjustments, with the forthcoming
normalization of US monetary policy will likely be a
more persistent factor in determining future mortgage rates.
Given stable inflation and moderate
economic growth in the Canadian economy, pressure from
rising US rates will likely be the main source of upward
pressure on mortgage
rates over the next year. They are
forecasting that 5-year qualifying rate on mortgages will
increase to 4.79 per cent in early 2016 before gradually
rising to 5.11 by the end
of next year.
