The Canadian Overnight Repo Rate Average tracks the Bank of Canada’s policy rate more closely
Mortgage rates are hitting multi-decade highs and pressuring family budgets in ways we haven’t seen since the 1980s.
Those expectations show up in the CORRA market, and I’ll occasionally reference them in this column. The purpose is to give you a sense of where the big money on Bay Street thinks rates are going.CORRA stands for Canadian Overnight Repo Rate Average, but ignore the jargon. Just know that CORRA has become Canada’s benchmark “risk-free” interest rate. Banks and institutions use it to price all kinds of loans and derivatives.
By contrast, the range of outcomes is drastically wider a few years from now. By then, rates could be affected by significant changes in inflation, another crisis, recession, stagflation and so on – all of which could radically change the path of mortgage rates.Here’s a look at where the market thinks rates are headed based on the CORRA forecast curve.
If rates are expected to fall materially, that may improve one’s implied chances of paying less in a variable-rate or short term. If rates are expected to rise materially, that might improve one’s odds in a medium or longer fixed term. After the U.S. banking crisis this past spring, the market was briefly expecting Bank of Canada cuts as soon as this summer. Those expectations have now been pushed back over a year, given stubbornly high core inflation and a resilient economy.
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