Vancouver (BCREA) – Canadian mortgage rates were driven to a new record low in the fourth quarter as the Bank of Canada focused its program of quantitative easing (QE) at the middle of the Canadian yield curve. With the Bank buying $4 billion in 5- and 10-year bonds per week, the benchmark 5-year Government of Canada bond fell to as low as 0.30 per cent and dragged 5-year fixed rates to an average of 1.84 per cent. Along with a massive expansion of its balance sheet to facilitate QE, the Bank of Canada has also reaffirmed its plans to keep its overnight policy rate at 0.25 per cent until it sees slack in the Canadian economy fully absorbed.
Given current forecasts for economic growth, that may not occur until 2023, meaning these low rates will be around for quite some time. There are, however, other factors in the economy and financial markets that may push mortgage rates marginally higher over the next year. Canadian 5-year bond yields jumped about 15 basis points on the announcement of a successful vaccine as markets re-evaluated timelines for a potential end to the COVID-19 pandemic and a full economic recovery. It remains to be seen whether the impact of this brighter outlook will overcome the dark winter of rising COVID-19 cases.
Click here to view the December 2020 Mortgage Rate Forecast.