Interest Rate Forecasts for 2019

By Mary Liang |

Mortgage Rates Vancouver BC

Falling inflation in both Canada and the U.S., as well as weakening economic forecasts for the year ahead, have led to tempered forecasts for interest rate hikes in 2019.

Just months ago a January hike was all but certain, but the next rate hike is now unlikely until the spring or summer at the earliest, according to rate forecasts.

There are even some, like Capital Economics, who are calling for a rate cut by next December.

“…we think that weak prospects for domestic demand will cause the Bank [of Canada] to remain on hold for most of 2019, before cutting rates at the tail end of next year,” reads the Canada Economic Outlook report.

In the B.C. Real Estate Association’s latest Mortgage Rate Forecast, it forecasts the BoC will be forced to scale back its rate-hike plans, and will now take until 2020 to raise its overnight target rate from the current 1.75% to 2.50%.

“We expect the bank will at most be able to raise its policy rate twice next year, though we are leaning toward a single rate hike as the most likely outcome,” reads the report. “Variable rates may rise modestly with a higher prime rate, while 5-year fixed rates will likely remain relatively flat and may even decline in the first quarter of 2019.” The association foresees the average 5-year fixed rate to drop to 3.64% in the first quarter of 2019, before rising to 3.74% by Q2.