The Canadian Mortgage and Housing Corporation (CMHC) has reported in their latest Great Toronto Housing Association Market Outlook that posted mortgage rates eased by about 50 basis points in the first four months of this year, although rates in late April were 30 to 35 basis points higher than they were 12 months prior. Mortgage rates are expected to trend marginally lower throughout 2008, but will be within 25-50 basis points of their current levels.

For 2009, posted mortgage rates will begin to drift up slightly as the year progresses. For 2008 and 2009, the one-year posted mortgage rate is forecast to be in the 6.50- 7.50 per cent range, while three and five-year posted mortgage rates are forecast to be in the 6.75-7.50 per cent range.

Interestingly, the CMHC also believes that after first time buyers saw a huge uplift in 2007, as almost 60% of home buyers were upgrading from rental accomdation, these buyers will drop throughout 2008 and in 2009. As first time buyers continue to find it tough to get on the property ladder, all the way through 2009, we will also see the continued trend in the Canadian mortgage market towards new products such as the 40 year amortization period and in some cases the 100% mortgage, coupled with less-expensive housing types such as the numerous new build condos in the downtown core.

 City Year Total Housing MLS sales MLS average Mortgage rates Mortgage rates
Starts price (1 year) (5 year)

Toronto 2007 33,293 95,164 $377,029 7.35% 7.54%

2008 (F) 35,000 84,000 $394,000 6.95% 7.01%

2009(F) 33,600 77,000 $404,000 6.83% 6.97%

Source = CMHC
MLS = Multiple Listings Service

The mortgage rate forecasts are particularly interesting as current Canadian mortgage rates are at the following levels:

Fixed closed 1 year = 4.69%

Fixed closed 5 year = 4.99% 

With all the recent woeful economic news coming out of the US, despite the fact that Canada’s economy is now more independent than it has been in the past, you would expect mortgage rates to decrease or remain flat in the next year or so.

I guess, only time will tell.