The tie-in with Canadian mortgages is, of course, with interest rates. There are two theories of how this could affect rates.
1) Economists expect Canada to start recovering late this year or next. However, if the U.S. gets bombarded by defaults again, and it impairs our economy, the Bank of Canada may be more cautious than expected in raising rates.
2) Then again, if central bankers continue printing money, inflation could become a dangerous threat. Moreover, if governments keep issuing new debt to pay for economic stimulus, this new supply could further drive up long-term rates. (A story on this)
How much these two theories offset each other is anyone’s guess. Perhaps, for the foreseeable future, short-term rates (and variable/1-year mortgages) will remain lower than normal while long-term rates (e.g., 5-year fixed mortgages) drift higher.
Sidebar: U.S rate resets are but one factor that could affect Canadian interest rates over the next 3-4 years. The global economy, supply of new government debt, and commodity prices are examples of the countless other factors. It is this endless and unpredictable array of economic variables that make forecasting mortgage rates near impossible.