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What will happen to mortgage rates over the next 1-5 years is our client’s top concern lately. The economy seems to be in a “will they, won’t they” relationship with interest rates. The only thing that seems to be certain today is uncertainty. So where does that leave homeowners or homebuyers who are trying to find the best mortgage rates?

Before we get into the predictions, let’s quickly review the link between mortgage rates and interest rates set by the Bank of Canada.

the best mortgage rates

The Economy, Interest Rates, and Mortgage Rates

Getting the best mortgage rates depends a lot on the state of the economy. When the economy is red hot, interest rates rise. Why? Because when the economy is strong, more businesses tend to borrow money to expand their production, and more people tend to borrow money to buy a car, improve their homes, or buy bigger homes. This demand can cause interest rates, and mortgage rates, to rise. In quickly growing economies, the cost of everyday goods can also spike, so you’ll see prices at grocery stores and gas pumps go up.

A healthy level of inflation is good – it means the economy is growing. Too much growth? Well, that means many can no longer afford to purchase the basics let alone luxury goods.

When the economy is really strong, the Bank of Canada’s policy is to raise its rates to slow the effects of inflation. This means higher costs for lenders, which they pass on to you, the borrower.

Interest rates in Canada are also affected by global markets, especially the US. So, our interest rates are strongly affected by changes south of the border and in Europe.

All of this is to say that predicting mortgage rates in 2023 means predicting how economists and financial thinkers believe our economy – and the global economy – will perform.

Will Interest Rates Rise or Fall in 2023?

In January 2023, the Bank of Canada raised the benchmark rate from 4.25% to 4.5% – continuing the trend of steady rate hikes during the last 9 months to slow inflation and cool the housing market. Despite the ongoing rate hikes, the economy performed better than expected in December.

Most economists expect 2023 to be a period of “watch and wait” to see if the economy slows or continues to grow.

Many forecasts put the peak Bank of Canada interest rate in 2023 between 4.25% to 4.75% (source Focus Economics).

If the economy begins to cool and we dip into a recession, we should see a return to lower interest rates – and lower mortgage rates. If the economy continues to be strong, we may see another interest rate hike later in the year.

Getting the Best Mortgage Rates in 2023

No one has a crystal ball. We are still feeling the impacts of COVID. The war in Ukraine and ongoing supply chain issues have left many businesses and individuals in a state of flux.

Let’s make sure your mortgage isn’t a source of stress and confusion. There are many tools available to help you calculate the mortgage you can afford. Choosing options like accelerated payments can help you pay your mortgage down faster. You can also renegotiate your mortgage if you are having trouble making payments.

Mortgage Brokers Work to Get You the Best Mortgage Rates

We’ve said it before, and we’re going to keep saying it. Mortgage brokers can help you get the best mortgage rates, with better rates and terms than the big banks offer.

It’s a simple equation. Big banks make their money by charging you the highest interest rate they can. Mortgage brokers make money by getting the best mortgage rates and terms for you. We get paid by the lender for bringing you to their business. We get even more business by having satisfied customers.

Let HW Advantage Help Take the Worry Out of Your Mortgage in 2023

Whether you’re buying a new home or renewing your mortgage, you can trust the experts at HW Advantage to help you get the best mortgage rates around. We’ll guide you through the advantages of fixed vs variable mortgages, and help you determine the optimal rates and terms for you. If you’re ready to buy a new home or renew your mortgage, reach out to HW Advantage today!

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