Canadian Housing Market – What’s in Store for 2019

By The A-Team | Jan 07, 2019 | Fort McMurray- Buyers Advice

The New Year is full of new things for the Canadian mortgage market. We have lots of things to tackle when it comes to such a fluid and versatile market, to begin with. Economists are making predictions while trends in the financial field, as well as international agreements, have much influence as well.

Let’s look closely at what economists have to say about the mortgage trend in 2019, particularly the forecast on lower interest rates which could certainly affect the market:

Expert Forecast on Bank of Canada to Cut Interest Rates in 2019

After years of monetary policy easing and a sustained period of historically low-interest rates used to buffer weaker economic conditions, the Bank of Canada began hiking its policy rate in July 2017.

Since then the central bank has increased the overnight rate, which influences the mortgage market, four more times by 25 basis points each. The most recent hike took place this past October, putting the overnight rate at 175 percent – with many experts anticipating more of the same this year and the Bank of Canada suggesting as much itself. Via

However, an economic research firm, Capital Economics, makes a contrary prediction based on the downturn of the oil prices by 40 percent in the previous months. According to the researcher, the effects of the oil price decline was “seriously underestimated” by the central bank.

Other factors that could reverse the interest rate hike in 2019 are the cooling national housing market and consumer spending:

USMCA and Mortgage Rates

In October 2018, Canada and its closest trading partners – the United States and Mexico – agreed to the new trade deal, which will replace NAFTA, called the United States-Mexico-Canada Agreement (USMCA).

While the new deal is expected to have far-ranging implications for many industries, including the auto and dairy industries, it has also impacted Canadian mortgage rates. Via

Let’s say that you’re a first-time homebuyer in the Canadian real estate market. You need to consider many factors including home prices, down payment amount, income, and interest rates. The Bank of Canada increased its interest rate benchmark three times in 2018, citing that trade uncertainty is one of the major perpetrators.

The USMCA deal affected the mortgage rates of BoC as the central bank further surged:

BoC Officially Buys Canadian Mortgage Bonds

Canadian Mortgage Bonds (CMBs) are bonds used to fund mortgages, and guaranteed by the CMHC. Investors buy the bonds, and lenders use the cash to lend to mortgage borrowers. Since the CMHC (and the Government of Canada) guarantee them, they’re a very secure investment.

Secure investments pay relatively low yields, making them a cheap mortgage funding vehicle. Via

The Bank of Canada will be making some drastic moves with its investment in Canadian mortgage bonds.

More news updates on the Canadian mortgage rates and trends in the market will be available for another roundup. The central bank is purchasing CMBs in order to make up for its liabilities, particularly circulating currency. In theory, interest rates or inflation is unlikely.

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The A-Team

RE/MAX® Fort McMurray's #1 Real Estate team of hard-working, talented REALTORS® who specialize in helping you successfully sell or buy.