The Bank of Canada announced this morning that they will be maintaining their overnight rate, which means there is no increase to prime rate. This is exactly what was expected to happen. This announcement came this morning, December 5th at 10am EST.

As we head into 2019, the Bank of Canada will continue to have their finger on the trigger for further rate increases and they are still expecting to increase prime rate at least two more times next year. But will this actually happen?

There are some changes since last predictions were made. The GM plant in Oshawa is closing, which is huge for Ontario’s economy. The oil situation in Alberta and lack of new pipeline development by our beloved federal government will also have an impact.

This does not mean that we will not see any further increases to mortgage rates however. The Bank of Canada will still be looking to increase them at the first opportunity, and will need to do so if they are to meet their inflation targets. However, there are times when the opposite can happen.

Fixed mortgage rates SHOULD be down right now, however they are up, and will continue to remain up.  New mortgage regulation has taken a toll on bank profits believe it or not. Bond yields are down right now, so fixed mortgage rates should be as well. But they are not. As a lender’s profit is directly related to the spread between the rate your payments are based on, they are now operating on a higher margin. This is needed to make up for lost profits earlier this year.

I would not expect fixed mortgage rates to plummet anytime soon and would expect them to increase throughout 2019. The increases just may not be quite as large as previously predicted.

You can follow the bond yields yourself here. 
You can read about the announcement here. 

Currently, there are still 5 year fixed rates available for as low as 3.44% – 3.74%, depending on your exact situation. Variable rate mortgages range from prime -1.24% to prime -0.75% (2.71% – 3.20%). Mortgages with big banks hover around 3.59% – 4.04% for 5 year fixed or 5 year variable at prime -0.60% (3.35%).

There is also a great 7 year fixed mortgage available for 3.59% for those with high ratio (insured) mortgages or those with 35% or greater down payment/equity. (not available on homes valued at over $1 million if purchased after November 30th, 2016.  This rate applies to purchases and switches only).

 

Paul Meredith is the author of the Amazon #1 best selling book, Beat the Bank – How to Win The Mortgage Game in Canada, and has ranked as one of the top 75 mortgage brokers in Canada since 2016.  He was a finalist for Mortgage Broker of the Year in 2018, and can be seen as the exclusive mortgage broker on season two of TV’s Top Million Dollar Agent.