I was recently looking at average
residential mortgage rates since 1951. The highest being 21.46% in
Sep 1981. Our current 5 year best rate was only lower in 4 years
since 1951 for December .... and tied with last year. In 1951,
1952, 2004 and 2005 the December rate was slightly lower than
current rates.
There are reasons we can expect mortgage rates to decrease
The Bank of Canada will have its last of
this years 8 scheduled meetings on Dec 4th. There is a great
expectation that the overnight interest rate will be reduced which
in turn will affect the prime interest rate. Two major influences
are the strong dollar and a low core inflation rate. The first
meeting of 2008 will be Jan 22, with the most optimistic forecast
I've read recently projecting 4 times 25 bps reductions until
April - thats 1% less, would be nice. The most recent trend is
downward leading to a decrease in variable mortgage rates.
Current 5year Bond rates are close to 2% lower than 5 year fixed
mortgage rates. This is a very health spread, for the banks at
least. In the past a spread of 1.4% would be sufficient. So there
is some pressure to see a reduction. Some explanation given for the
increased spread is due to the recent fall out from the US market
which has affected "normal" selling/buying of commercial paper. I
would prefer to see a reduction in mortgage rates than get used to
a greater spread.
