Among the rate predictors out there, two camps seem to have formed: 

1. Those who expect the BoC to hike rates in mid 2010
2. Those who don’t.

Here is commentary from analysts who predict rates are going up by mid-next-year:

• “Our view is they start raising rates at the first opportunity in July.” – BMO’s Doug Porter, talking about the Bank of Canada (Source: WFP)
• “The Bank of Canada will retain its commitment to a 0.25% overnight rate until mid-2010…We expect the first rate increase to come next summer with an additional hike forecast in the final quarter of next year. This will result in the overnight rate finishing 2010 at 1.25% (up 1%). In 2011…the Bank will continue to raise the overnight rate, which we estimate will be 3.5% by year-end 2011.” – RBC
• "There's a very good chance long-term rates will head up before (June 30, 2010).” – Scotia Economics
• Rates will rise 1.75% by December 2010, says Action Economics economist, Ryan Brecht. (Source: National Post)

Here are some analysts who think the Bank of Canada will wait until the end of 2010 or later to move rates.

• “We believe that the slower growth path for real GDP will keep the Bank of Canada on the sidelines past its conditional commitment, and the first rate hike will not come until the fourth quarter of 2010.” – TD Bank
• “With the Fed likely on the sidelines until 2011 and inflation risks still tilted to the downside, we think the BoC has the leeway to only kick off its monetary firming cycle in the final quarter of next year.” – Desjardins
• CIBC’s Avery Shenfeld predicts the Bank of Canada will not hike at all in 2010. (Source: CIBC Economics)

Remember one thing.  What these economists are predicting is a change in the Bank of Canada’s overnight target rate.  That affects variable-rate mortgages.

Fixed rates are a different tune.  They’ll move in step with bond yields, which should rise before the Bank of Canada decides to act. 

CIBC, for example, predicts that longer-term bond yields will rise roughly 1% in 2010. 

Scotia Economics predicts yields will rise next year as well. It expects a 1.19% jump in the 5-year yield. That would put it at 3.75% by December 2010.

The 5-year yield sat at 2.56% on Monday.

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Sidebar:  The people above are pretty smart, and they formulate their opinions using way more economic data than we can imagine. Yet, they can’t all be right.  Some will be wrong. 

For that reason, don’t hitch your wagon to a particular prediction. Instead, be prepared for the worst case (a spring 2010 hike and ensuing rate increase cycle) while hoping for the most likely scenario (that rates begin a 2-3% ascent in Q3 2010.)

The “most likely scenario” can be seen as a function of the ‘average’ economist’s opinion…