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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.