Helmut Pastrick is the chief economist for BC Central Credit Union. Helmut expects that mortgage rates will continue to decline in 2008 and 2009. "Most of the decline in 2008 will be in variable-rate mortgages, while in 2009 fixed-term mortgage rates will drop the most," he said.
"The Bank of Canada cut its target rate by 50 basis points to 3.50% on March 4, bringing the cumulative reduction in rates to 100 bps since the Bank started easing last December. Another rate cut in April is practically guaranteed and another in June is highly likely. Further rate cuts are possible, but at some point the economic news and outlook will begin to improve. That will probably play out in the second half of 2008. There is considerable monetary and fiscal stimulus in the U.S. pipeline and some in Canada as well. The Bank is in a holding pattern until mid-2009, when it will begin returning the target rate to levels appropriate to evolving higher economic growth. Longer-term bond yields will climb higher as the economic news and outlook improves in 2009. However, this will not translate into higher fixed mortgage rates, since the cost of funds will decline when credit markets return to a more normal state and the current abnormally high risk spreads narrow."
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