Interest Rate Predictions For The Future

Today more than ever, we worry about rising interest rates. The Bank of Canada has increased the overnight rate several times starting in March 2022. They started at 2.45% and have increased them FAST to 5.45% in a relatively short period of time. During this time, they continue to say that they must keep doing this as inflation (including houses) is still red hot.

My prediction is that our government has overshot the rate increases, and house prices will be impacted very severely as a result. Rate increases take time to affect the market. Those with a variable rate feel it right away. However, most people with fixed rates might not feel the rise for the next few years when their mortgage is up. Thus, I believe that they, the government, have overshot on the rate increases, and it is going to force us into a recession that will result in them having to lower the rates again.

How will this affect you?

Well, higher rates mean higher payments. Some people may not be able to keep the home that they purchased a mere seven months ago when we had variable rates of 1.45% compared to the 4.45% we are now paying.

We have already felt a considerable slowdown in the number of transactions that are occurring. This alone isn't a bad thing, as market activity has gotten to irresponsible and unsustainable levels. However, I predict my business will reduce by 20% to 25% this year due to fewer borrowers wanting to take on increased debt loads and a lot of borrowers playing "sit and wait," hoping for lower rates in the future.

Future of the mortgage industry

If I am right, we will have a price reduction, especially in higher-priced markets. This could be a 25% to 30% reduction from the peak of February and March 2022. This will result in brokers making a lot less money and could cause my industry to contract.

Overall, I think the rate moves are negative. I agreed that rate increases were needed, but this was too sudden and too far moved. I think a lot of real estate wealth has evaporated and hurt Canadians.

For more details about the latest mortgage developments, connect with us at Rowan Smith Mortgage Broker - City Wide Mortgage Services. I have been in the banking and broking sector for more than two decades and have a pretty decent understanding of how the process works. We work on various types of mortgages and provide our clients with a better understanding of the process they are getting through, so they are informed and can make better decisions.

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