Mortgage Rates - Canada2182188

Mortgage rates Canada have become quite complex over the recent years. The market in Canada is currently governed by different mortgage products, features and even technologies.

The role of banks in Canada is quite significant in the market. According to the estimates at the end 2004, the banks in Canada had $368 billion in outstanding residential mortgages, which accounted for 62.1% of total mortgage market ($593 billion).

The Canadian mortgage market is dependent on the Bank of Canada that decides the interest rates on the monthly basis.

Mortgage Rates Canada: Who Adjusts

A Canadian government agency, Canada Mortgage and Housing Corporation (CMHC), adjusts the Canadian mortgage market. CMHC ensures that low cost mortgages are available to Canadian consumers. In order to achieve this, CMHC provides:

Insurance policies to lenders to protect them in case of defaults Assistance to homebuyers

Canada Mortgage Rates: Future Prospects

In a rate meeting held on September 10, 2009, the Bank of Canada kept the interest rates steady at the record low of 0.25%. In addition, the bank reiterated its expectations that interest rates may remain flat until July, 2010, if the outlook on inflation remains unchanged.

The bank's expectations were reiterated by the RBC Global Management economist, Patricia Croft, who believed that rates might hike by the third quarter of 2010. Similarly, Laurentian Bank had also suggested in its report published in October 2009 that mortgage rates may be hiked to 3.25% by end 2011, starting from third quarter of 2010.

However, Scotia Capital economist, Derek Holt, believed that there is a possibility that the Bank of Canada may keep the rates unchanged for the remainder of 2010.

Mortgage Rates Canada: The Implications

If rates are hiked to the level expected by Laurentian Bank in Canada, it would mean that:

Interest rates would no longer be able to act as the support mechanism for the country's real estate market. Highly-leveraged homebuyers, who have little savings or equity, could be highly affected.

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