Chart : Shelter Cost As A % Of Average After
Forecast
Shelter-cost-to-income ratio at mortgage loan origination, estimated with the average MLS® price and average household disposable income, assuming: minimum down payment and maximum amortization period for insured mortgages, 5-yr fixed discounted interest rate.
| 2024 Q4 | 52.6% |
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From its historical peak of $770,812 in Q1 2022, the national average MLS® price should decline 14.3% by Q2 2023. On an average annual basis, we now predict this price to grow 2.6% in 2022 compared to 21.3% in 2021 and decline by 6.2% in 2023 . Canadas house prices will resume their upward trend in the second half of 2023 as demand rises with the recovery in economic and income conditions and mortgage rates begin normalizing. This house price is predicted to grow by 2.1% in 2024.
Recessions And Mortgage Rates
If that turns out to be the case, mortgage rates may remain elevated throughout any 2023 recession. The Fed directly determines most interest rates, but not mortgage rates. However, its policies certainly influence MBS yields.
Now, in theory, its possible for mortgage rates to fall while the Fed is hiking other rates. So none of us can be certain about anything.
However, Freddie Macs archives show mortgage rates averaging 16.63% in 1981 and 16.04% in 1982, when Mr. Volker was hiking other, general interest rates during a ghastly recession. So Im not holding my breath while I wait for a recession to make mortgages more affordable.
And, in my opinion, significant and sustained falls in mortgage rates are unlikely until well into 2023.
Work For A Lower Interest Rate
One of the biggest parts of home buying is the mortgage rate youre able to lock into. Everyone wants the lowest possible interest rate they can get but thats mostly determined by what the lending market offers on a given day. Unfortunately, timing isnt always in every borrowers favor.
Thats where mortgage discount points come in. Its a lever borrowers can pull to decrease their monthly mortgage costs and paying down your rate could save thousands of dollars over the life of your home loan.
Rather than asking the seller to drop their price, a buyer can leverage a seller concession to buy down their mortgage rate via points, said Taylor Marr, deputy chief economist at Redfin. This will have a much greater impact on lowering their monthly mortgage payment than a lower price would.
Although, paying for mortgage points adds more upfront costs at closing, which could be a barrier to entry for some borrowers. Shopping your rate around by contacting multiple lenders to see if they can offer a lower one only requires time and effort. Given how lenders differ and how volatile interest rates tend to be, taking your first offer could be a mistake.
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Should You Lock A Mortgage Rate
If youre one of the lucky homeowners who can still benefit from a refinance, its likely best to lock a rate as soon as possible. Most experts expect mortgage rates to continue rising throughout 2022, so the window to lock in a lower rate could be closing.
If youre looking to buy a home, you might also want to lock a rate sooner rather than later. However, your timing will depend more on the local housing market and when you can get an offer accepted than on where rates are sitting.
As most mortgage professionals will tell home buyers: dont try to time the market. Its always a good time to buy if youre financially ready. And, despite rising rates, 2022 is no exception to that rule.
Economic Growth Seen To Slow Below 2% Before Recovering
Combating inflation without causing a recession is a tough balancing act central bankers are aiming to succeed in. This is why gross domestic product readings are crucial data points in determining how high central bankers are willing to hike interest rates.
Canadas economy climbed by 0.1% in June after a flat reading in May, with real GDP growing by 0.8% in the second quarter, Statistics Canada reported on 31 August.
Natural Gas
| 60.00 |
The country’s GDP increased at an annual rate of 3.3% in the second quarter, marking the fourth straight quarter of growth. It was below the BoC target of 4%. It was also below analysts expectations.
Scotiabanks median forecast of Canadas GDP for the second quarter stood at 4.4%, with a low forecast of 4.2% and a high estimate of 4.8%. The bank expected Canadas GDP to grow at the average 3.5% in 2022, slowing to 1.6% in 2023.
The Bank of Canada predicted that the country’s economy would grow by 3.5% in 2022, then slowing to 1.75% in 2023 and 2.50% in 2024, owing to policy tightening to lower inflation.
In its Septembers forecast, ING Group estimated Canadian economic growth to ease to 2.8% in the fourth quarter 2022, from 3.9% in the third quarter. For 2022, ING projected 3.6% growth on average. Canadas economy was expected to slow to 1.5% in 2023, recovering to 1.9% in 2024.
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Recent Housing Market Developments And Outlook
Housing markets in Canada performed strongly in 2020 and 2021 despite the pandemic-related economic downturn. Growth in housing demand was strong as workers in high-paid occupations were much less affected by the pandemic. A shift in preference towards larger properties from the growing need for telework and homeschooling also drove growth.
Housing demand was also supported by fewer spending opportunities due to public health restrictions which significantly increased savings and hence the resources available to purchase a property. Other contributors to housing demand include historically low mortgage rates and, since 2021, the recovery in population growth. It recovered to its pre-pandemic rate with the relaxation of pandemic-related border restrictions.
Robust growth in housing demand combined with Canadas structural supply shortage and insufficient new listings to satisfy the demand on the resale market resulted in a sharp escalation in housing prices from Q2 2020 to Q1 2022. Over this period, the seasonally adjusted MLS® average price for Canada increased by about 53%. From Q2 2020 to Q1 2021, the increase was largely driven by a compositional shift towards larger and more expensive properties. However, this compositional effect partly reversed afterward, which slowed the increase in the average price despite the continued underlying strengthening in house prices.
What Is A Mortgage Rate Lock
As the name might suggest, a mortgage rate lock essentially guarantees that the rate in your mortgage application is the one youll be paying given you dont make any alterations to the application. At a time when interest rates are volatile like now, it can be a good idea to lock in a rate that youll be able to afford.
As long as you dont make any changes in your mortgage application, the rate you lock will be the one youll be.
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Thank You For Sharing
Mortgage rates started the week at their highest level in 20 years as the Mortgage Bankers Association continued to pare back expectations for mortgage originations this year.
Investopedia.com reported that the average rate for a 30-year fixed-rate purchase mortgage was 6.96% on Monday. Compared with average weekly data from Freddie Mac going back to 1971, it was the highest rate since it was 6.99% for the week ending April 12, 2002.
Current Mortgage Refinance Rates
Refinancing became a bit more expensive today as 30-year fixed and 15-year fixed refinance mortgages saw their mean rates go higher. If youve been considering a 10-year refinance loan, just know average rates also saw an increase.
The average refinance rates are as follows:
Find current mortgage rates for today.
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Rate Spikes Spook Both Buyers And Sellers
Whats not hard to see is the severe consequences rising rates have had on the housing market, especially among entry-level homebuyers.
People need to earn $40,000 more in order to afford to buy the median-priced home compared to a year earlier, Nadia Evangelou, senior economist and director of forecasting at the National Association of Realtors, said in a news statement.
While the median home price has softened to $427,000, it remains too high for many buyers. At 6.92% with a 20% down payment, the monthly mortgage payment is $2,254, according to Realtor.com, or 75% more from the same week last year, adding $11,600 to the annual cost of financing a home.
Many first-time homebuyers are sitting it out instead, and now move-up buyers are choosing to stick to their current 3% rate and put off their purchase plans.
For repeat homebuyers, not only are they generally looking at a more expensive home, but they are looking at a mortgage rate that is, at least in some cases, double what they have right now, Ratiu said. So the impact on families, on a budget is significant.
Gabriella is a personal finance reporter at Yahoo Money. Follow her on Twitter @__gabriellacruz.
Borrowers Will Fix For Longer
When taking a closer look at mortgages in 2021, its interesting to note that more borrowers took out plans stretching longer than the typical 25 years. And although this increases interest, homeowners will find that their monthly payments are significantly less.
If you think thats a good thing to consider, Habito launched a 40-year fixed-term plan with no exit fees back in March.
The industry can expect to see more borrowers opting for longer fixed-term plans if interest rates continue to rise as they do.
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The Indicators To Watch That Will Determine When Interest Rates Go Up Or Down
The BOE uses a number of economic indicators when deciding whether rates will rise or be cut. So understanding the key economic indicators is important when judging when interest and mortgage rates are likely to rise or be cut. Below is a roundup of the most important indicators to keep an eye on. Of course in the short term the impact of the coronavirus on the UK economy is likely to have the largest influence over where interest rates go next.
/1 Arm Mortgage Rates
A 5/1 ARM has an average rate of 5.39%, which is a climb of 7 basis points compared to a week ago.
An adjustable-rate mortgage is ideal for individuals who will sell or refinance before the rate changes. If thats not the case, their interest rates could end up being significantly higher after a rate adjusts.
For the first five years, a 5/1 ARM will typically have a lower interest rate compared to a 30-year fixed mortgage. Keep in mind that depending on how much your loans rate adjusts, your payment has the potential to increase by a large amount.
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What Is Your Forecast For Inflation And Mortgage Rates Over The Next Two Years
As previously mentioned, we believe inflation has peaked at 7.3% in the year to June 2022. We expect to see inflation easing from here. Inflation should fall back to within the RBNZââ¬â¢s target band of 1-to-3% in 2023. Mortgage rates are likely to peak at or slightly above current levels. Mortgage rates are likely to hold around current levels into next year.
Looking At Mortgage Rates Beyond March
Dont count on rates will improve after spring has sprung and we head into the second half of 2022, unfortunately.
Cases in point: Fannie Mae now expects the benchmark 30-year fixed-rate mortgage to average 3.5 percent and 3.6 percent, respectively, in the first quarter and through the rest of 2022. That compares to 3.3 percent and 4 percent, respectively, as predicted by the Mortgage Bankers Association. Meanwhile, in its latest forecast, Freddie Mac envisioned a 3.6 percent average 30-year fixed rate for the year.
While higher short-term interest rates will push up mortgage rates, I expect some of this impact to be mitigated eventually through lower inflation, Evangelou says. Thus, I expect the 30-year fixed mortgage rate to continue to rise, although we arent likely to see the big jumps that occurred over the past few weeks.
Kiefer concurs.
Mortgage rates are likely to continue to move higher throughout the balance of 2022, although the pace of rate increases is likely to moderate, he notes. Much of the increase in rates in early 2022 is in anticipation of what will happen later this year, especially with Federal Reserve interest rate policy.
Rates could settle down if the Fed takes aggressive action against inflation over the next several months by raising interest rates repeatedly and providing specifics about balance sheet runoff, McBride believes.
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Will Mortgage Rates Keep Rising
Mortgage interest rates spiked to start 2022, rising more than two percentage points between January and May.
If youre considering a home purchase or refinance, you likely want a better idea of where rates will land in the coming weeks and months. To find out, we reached out to eight mortgage industry experts for their mid- to late-2022 mortgage rate predictions.
The pros vary widely on just how high mortgage rates could go in 2022. But they almost universally agree that rates will rise. So if you have a chance to lock sooner rather than later, its likely wise to do so.
In this article
Fitch: Deeper Uk Recession Now Likely As Interest Rates Rise Faster
Fitch, which last week cut the outlook on the UK to negative, has now predicted that the UK GDP will shrink by 1% in 2023, following the extreme volatility in UK financial markets and the prospect of sharply higher interest rates.
Last month, Fitch had forecast a drop of -0.2% of GDP next year.
Fitch has warned that rising funding costs, tighter financing conditions and increased uncertainty will outweigh the impact of the governments tax cuts next year.
Fitch sees the economy entering recession from 4Q22 as rapid rate rises compound the impact of the energy crisis and the contraction in the eurozone.
Fitch also predicts that the Bank of England will have raised interest rates to 4.25% by December, from 2.25% today, and up to 5% by the second quarter of 2023.
Fitch Ratings has lowered its UK GDP forecast for 2023 now expecting UK GDP to decline by 1% in 2023 compared with -0.2% in September”We now anticipate the policy rate rising from 2.25% to 4.25% by December 2022 and 5.0% by 2Q23″
The Government says it is confident it can provide enough detail on policy for the Office for Budget Responsibility to publish its economic forecasts alongside the Chancellors financial strategy on October 31.
The Prime Ministers official spokesperson told reporters today:
Asked why Kwasi Kwarteng brought forward his medium-term fiscal plan, the official said:
Veteran civil servant James Bowler has been appointed as the top official at the Treasury.
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Mortgage Transactions Are Slowing Down
As far as the housing market goes, it couldn’t sustain the pace of home buying we just witnessed over the past couple of years. All those people who moved homes all at once or became first-time buyers in a rush? That activity level is not likely repeatable any time soon, so I completely expect Canadians to settle into a more typical buying pace â which we already see in real-time.
People will still need to move or want to buy a home in the ordinary course. And we’re here to help them with that.
Will we see a recession as a result of rate hikes? What will happen to the variable vs fixed rate spread? What else is going on with the mortgage industry right now?
Make sure to sign up for our newsletter to get the latest Dan Eisner updates and other mortgage insights from our leadership team here at True North Mortgage.
Have questions about where rates are going and how it may affect your mortgage or pre-approval? Give us a shout, anywhere you are in Canada. We have your best rate, expert advice and unbeatable service â with over 11,000 5-star reviews from our happy clients.
Mortgage Interest Rates Forecast: Will Rates Go Down
Mortgage rates have risen since the start of 2022, reflecting investors’ concerns that the economy is heating up and that the Fed will cool it down and reign in inflation. U.S. Treasury bond rates, which mortgage rates follow, encountered two tough patches this year: in late February, when Russia invaded Ukraine, and in mid-May when investors worried about poor consumer spending. Bond yields and mortgage rates declined throughout these times.
Most mortgage-market analysts predict rates will be choppy over the next few months but will settle above where they are nowwith the 30-year fixed-rate mortgage just around 5 percentfor the next year or two. The Fed raised interest rates by 75 points in June the biggest increase since 1994.
Then it enacted its second consecutive 0.75 percentage point interest rate increase in July, taking its benchmark rate to a range of 2.25%-2.5%. Now, it is set for another 75-basis-point rate hike in the coming weeks due to the hot U.S. consumer price inflation data released for August. Before the data, the majority of economists anticipated that the Fed would slow the pace of rate hikes in November to a half-point increase, but now a 0.75-point increase is predicted.
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Economic Reports Next Week
This week was crammed with economic reports and events that might have moved mortgage rates. However, next week provides a bit of a respite. And reports over the coming seven days are unlikely to have much impact unless they contain shockingly good or bad data.
- Tuesday Septembers industrial production index and capacity utilization rate. Plus the home builders index for October from the National Association of Home Builders
- Wednesday September building permits and housing starts
- Thursday September existing home sales and leading economic indicators. Plus weekly new claims for unemployment insurance to Oct.15
- Friday Third quarter indexes of common inflation expectations for the coming five and 10 years
If there are sharp movements in mortgage rates next week, theyre unlikely to be triggered by these usually innocuous reports.
However, you might want to keep an eye on events in the United Kingdom, where a new and inexperienced government has unleashed economic and political mayhem through its radical policies. If it manages to regain the markets confidence, mortgage rates might move lower. But if it fails to do that , those rates may rise.
