Fixed interest rates predicted to rise as economy grows

Jean-Guy Turcotte

Jean-Guy Turcotte

With the new mortgage rules only seven weeks away and fixed rates being relatively flat for the moment, there are going to be thousands of Canadians trying to front run the mortgage rules and firm up their mortgage plans before March 18th.

But there’s also another issue that may stir people to get their mortgages aligned and that’s the spring interest rate run up.

This Friday the most important stats of the month come out; the U.S. and Canadian employment numbers. If the statistics disappoint bond traders then the fixed interest rates will stay flat for the next little bit, however if there’s positive news then look for interest rates to rise during the following weeks.

Last year was quite unusual in the sense that the first quarter, January to March, the housing industry in Canada looked very strong and that the economy was recovering quite healthily. But once fixed rates rose up 0.60% on March 29th, with RBC leading the way, it seemed to have a cooling effect on the market, and rates ended the rise at the end of April a full 1% higher!

Five-year fixed discounted rates went from an average 3.69% to 4.59 – 4.79% in four weeks.

Consumers armed with their pre-approvals at the 3.69% level took advantage of the mortgage market as those pre-approvals were like holding onto a lottery ticket valued at $15,000.00 +/- (a 1% interest savings from 3.69-4.69 on a $300,000.00 mortgage is $16,500.00 in true interest savings over five years).

Later on during the year the Canadian consumer looking to obtain a new mortgage got unprecedentedly lucky, as the first quarter results were what economists called a “false start” as the economy looked ready to recover, but didn’t have the stamina to continue the course and fixed rates tumbled back down.

As economists are forecasting a more normalized year for 2011 -2010 was more of a rollercoaster – then we should see fixed interest rates rise as the economy grows and if the economy holds its own, then rates will not return to the levels we’ve been able to appreciate for the past two years.

The industry is going to be busy with many Canadians taking advantage of the current mortgage system before the March 18th deadline, and if rates rise before that date then there’ll be a flood of people looking to take advantage of those super low, probably never to be seen of again fixed interest rates.

If our economy is more stabilized throughout the year as the economists call for then these emergency low interest rates will no longer be required to keep our economy moving and then you can say goodbye to the sub 4% fixed interest rates.

If last year is a year we can call on for a forecast then I would wager that 4.50-5.00% would be where interest rates to end up once rates begin their inevitable rise and stay there until the economy becomes even stronger, then rates will rise again.

Jean-Guy Turcotte is an Accredited Mortgage Professional at Dominion Lending Centres-Regional Mortgage Group and can be reached for appointments at 403-343-1125, texted to 403-391-2552 or emailed at