Mortgage Rate Forecast
Mortgage Rate Forecast
March 2023
5-Year
Mortgage Rate Outlook Average
Discounted 5.24 5.19 5.05 4.95 4.95 4.75 4.65 4.55
Rate
Mixed signals from Canadian economic data are making
Source: Bank of Canada; BCREA Economics; Rob McLister, Mortgage
the outlook for the Canadian economy somewhat cloudy. Rate Analyst
While labour markets remain very strong, economic Note: Average five-year discounted rate is the average rate available in
the market, offered at a discount from the posted five-year qualifying rate.
growth appears to have stalled in the fourth quarter
of 2022. Most importantly, the monthly inflation rate
has significantly decreased, although it still remains
high when compared to the previous year, with total
CPI trending at 2.5 per cent annually over the past three
months and core measures of inflation trending at
between 2.5 and 3.5 per cent.
As long as the Bank of Canada remains on hold, and fixed A complicating factor of course, is the trajectory for inflation.
rates experience only minor increases, the uncommon Any economic recovery is contingent on interest rates coming
scenario of a notable negative difference between variable down sharply from their current level, which will not occur
and fixed rates will persist. unless inflation is back under control.
Growth in the fourth quarter of 2022 was nearly unchanged The Bank of Canada has moved to the sidelines while
from the prior quarter, following five consecutive quarters of it judges the past year’s impact of rate increases on the
growth and real GDP declined in the final month of the year. economy, particularly on inflation. Several factors point
Declines in business inventories and business investment to inflation beginning to normalize this year. Barring a
balanced out higher consumer and government spending significant shift, gas prices will start to subtract from year-
and more favorable net trade. Higher interest rates are clearly over-year CPI inflation. Additionally, raw materials and
impacting the most rate-sensitive sectors of the economy. shipping costs should benefit from a downtrend in global
Housing investment fell 2.3 per cent in the fourth quarter and commodity prices and a normalization of supply chains.
was down 11.1 per cent in 2022. As tighter borrowing conditions
One complicating factor for the Bank of Canada is the
impact the wider economy, we anticipate that growth will slow,
potential for a more hawkish US Federal Reserve. A widening
and the labour market will soften.
gap between Canadian and US interest rates would put
The open question for the economy remains whether a downward pressure on the Canadian dollar, which would
recession is likely to occur this year. Given the pace and cause import prices to rise, adding to Canadian inflation.
magnitude of tightening by the Bank of Canada, and signals
Nonetheless, we expect the Bank will remain on hold this
from traditional recession warning tools like the slope of the
year before lowering rates in 2024 once inflation returns
yield curve, the recession probability is high. Our model shows
to its target of 2 per cent.
two quarters of negative GDP growth starting in the second
quarter before a recovery begins toward the end of 2024.
Send questions and comments about the Mortgage Rate Forecast to:
Brendon Ogmundson, Chief Economist, [email protected]; Ryan McLaughlin, Economist, [email protected].
Mortgage Rate Forecast is published quarterly by the British Columbia Real Estate Association. Real estate boards, real estate associations and REALTORS ® may reprint this
content, provided that credit is given to BCREA by including the following statement: “Copyright British Columbia Real Estate Association. Reprinted with permission.”