Separately from that of the big 6 banks rate forecasts does not change much.
Below you will find a summary of recent estimates of the year the rate from each one of the main banks of Canada. Use them only as a rough guide because Economist rate prospects external markets have significant margins of error.
Overnight order of the Bank of Canada has a direct impact on variable rates of mortgages.
Bank 2011. 2012. BMO 2.00 3.50 CIBC 2.00 2,25 NBC 2.00 2.75 MIXTURE 2.00 3.00 Scotia 1,50 2,25 TD 2.00 3.00 End of year Avg 2.00 2.75 Chg for today + 1.00 + 1.75
(All figures are rounded to the nearest 1/4 point step.)
The last 5-year government bond yield forecast
Government bonds yields a 5-year fixed mortgage rates.
Bank 2011. 2012. BMO 3.58) 4.15 NBC 3.46 3.88 MIXTURE 3.30 4.05 Scotia 2.75 3.00 TD 3.50 3.80 End of year Avg 3.32 3.78 Chg for today + 0.53 + 0.99 (5-year forecast of the CIBC bond is not available.)
Variable-rate mortgage forecast
If the law of Canada primary securities dealers, the next increase Bank of Canada rate will happen on July 19. Overnight index swap dealers who make huge bets on the Bank of Canada plays are pricing in 7 September increased percentage. (Source: Reuters)
Major economists now predict 175 basis point boost overnight rate over the next 21 months. Their ratings, if accurate, suggests 4,75% prime rate by 31 December 2012, PRIME rate currently is 3.00% and 10-year period of prime is 4.40%.
On the basis of the 80 basis point discount from Prime Minister, these forecasts show a 5-year variable rates in the range of 3.95% by the end of the year 2012. This is a beautiful near today's 5-year fixed rates.
Forecast of mortgages at fixed interest rates
Large banks are provides 5-year bond yields climbing 99 basis points in the same 21-month period. This would yield a 5-year peg of 3.78% at the end of next year. The average yield for the 10-year, five years is 3.66%.
In a typical 120 basis point spread over yield these forecasts show discounted 5-year fixed rates may rise to around 4.86% by the end of the year 2012.
Rate forecasting in perspective
Large banks spend millions to formulate precise interest rate projections. Their economists use any data source, academic education, historical backtest and analysis tool, which can. And yet, try as they might, their forecasts are far from secure.
However, economists forecast a long-term and continuous editorial evaluations of speed still provide a useful starting point. Part of their value is in shows what can happen if the world unfolds without global crises and major economic disruption.
With this reference point as a "base case" these predictions can then be useful for creating a repayment models based on future rate assumptions. The key is to include a reasonable margin of error in these models, which is large enough to account for things like hyper growth/inflation or the aforementioned economic disturbances.
Other things of note: These forecasts are made by the banks and are subject to frequent changes. These data shall be provided only for general interest. Whenever your needs and risk tolerance to discuss with the professional mortgage before you act on this information.
History has shown that it is near impossible to accurately predict long-term interest rates to use such data at your own risk. That said, while the Economist forecasts are often wrong, they are still one of the better sources of educated opinion on interest rates.
"chg" = the expected change in rates of today. In other words, is the average forecast of minus Chg today rates. All estimates are based on the end of the year, with the exception of BMO.
Bank evaluations shall be taken of the latest forecasts published on their respective Web sites. For banks, reporting estimates of the rate as the average values for the quarter, we are averaging its Q4 and Q1 forecasts for the evaluation of the year figures. The overnight rate results are rounded to the nearest point of the 1/4, in accordance with the Bank of Canada standard rate setup steps.
Sources of data: TD, Scotiabank, BMO, CIBC, National Bank,
Rob McLister, THIS YEAR'S CMT MUSIC
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