Swap traders – who bet millions on interest rate direction – are pricing in a 93% chance that the BoC lifts rates on June 1st.
Also, eleven out of 12 analysts polled by Reuters now predict a June 1st rate hike. The analysts also predict a 100 to 175 basis point jump in the overnight rate by year-end. That suggests a 3.25% to 4.00% prime rate by New Year’s.
The news on a rising prime rate is fast being overshadowed by the surge in 5 year fixed rate costs. We suspect the prime rate will be less of a worry than the 5 year fixed money, which may hamper first time home buyers entry into the Vancouver real estate market, if it remains at elevated levels.
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