Brighter Days Ahead? BCREA Predicts Easing Mortgage Rates in British Columbia

The British Columbia housing market experienced a shift in 2023. Rising interest rates, driven by Bank of Canada hikes to combat inflation, put a damper on sales activity. But for those waiting to enter the market, there might be some light at the end of the tunnel. The British Columbia Real Estate Association (BCREA) released a mortgage rate forecast in September 2022, predicting a decline in fixed rates by early 2024 [BCREA]. This could be a welcome change for potential homebuyers in the province.

The BCREA forecast hinges on the Bank of Canada’s future actions. The expectation is that the Bank’s interest rate hikes will eventually bring inflation under control, paving the way for rate cuts by the end of 2024 or possibly mid-2025 [BCREA]. This, in turn, should lead to a decrease in fixed mortgage rates. The BCREA report specifically predicts an average five-year fixed rate of 5.05% by the year’s end, a significant drop from the highs seen in 2023 [BCREA].

However, the news isn’t all sunshine and rainbows. The BCREA report suggests variable rate mortgages might not see relief as swiftly.  While fixed rates are likely to decline as the Bank of Canada adjusts its policy, variable rates are expected to follow suit only after the Bank lowers its overnight rate [BCREA]. This lag could mean continued pressure for borrowers with variable rate mortgages.

Despite the caveat on variable rates, the BCREA report offers a more optimistic outlook for potential home buyers in British Columbia. The prospect of more affordable fixed rates in the coming year could re-energize the housing market. It’s important to remember that this is a forecast, and economic factors can always influence the actual rates. Staying informed about economic updates and consulting with a mortgage professional are crucial steps for anyone considering entering the housing market.

Source: British Columbia Real Estate Association (BCREA) [BCREA]