TD Bank has released a forecast for interest rates that looks ahead as far as 2019.
The Bank of Canada overnight rate is expected to remain at 0.5% until 2017, when it is expected to rise to 1.25%. TD expects that rate to increase to 2% by the end of 2018 and to 3% in 2019.
The five year government bond yield, which lenders base their five-year fixed rates on, is expected to close out 2015 at 0.9% before increasing to 1.6% next year. That upward trajectory is expected to continue in the following years; rising to 2.35% in 2017, 2.85% in 2018, and 3.3% in 2019.
And the talk of increased rates – no matter how delayed – could encourage clients to jump into the market sooner than later.
It may also fall to brokers to encourage clients to choose a lower term now, in order to ensure they come up for renewal at a lower interest rate.
“With growth held back by the recession in the first half of the year, 2015 provides a weak starting point for the forecast,” TD economists James Marple and Brian DePratto said in the bank’s long-term economic forecast. “Growth recovers in 2016, and from 2017 onwards remains near its estimated ‘cruise speed’ around 1.8%.”
The bank also provided a forecast for the housing and oil industries.
“Even after recovering, oil prices are expected to settle in the $70 range, sufficient for solid if unremarkable investment growth,” the economists said. “At the same time, residential investment is expected to contract in 2017 and 2018, consistent with a rebalancing of the housing market.”
One of Canada’s largest banks has released an economic forecast, which includes an interest rate outlook that goes as far as 2019 – so when can brokers expect to see rate hikes?