Canada’s lowest-ever variable mortgage rates could soon be a fond memory…quicker than some thought!

11 out of 12 analysts polled by Reuters now predict a June 1st rate hike. (Minds change quickly. Before yesterday’s Bank of Canada (BoC) announcement, it was only 3 out of 12.)

Swap traders–who bet millions on interest rate direction–are pricing in a 93% chance that the BoC lifts rates on June 1st.

Speaking of which, check out the move on this baby. This is the 3-month overnight index swap (OIS) rate. It represents the expected overnight interest rate over a 3-month period. It’s been a long time since it’s ramped up like this.

Here’s what analysts are saying now about the Bank of Canada announcement and future interest rates:

- "Removing the conditional commitment … (is) as good as cementing a June 1 hike…That leaves open the debate over whether 25 basis points or 50 basis points is likely." — Derek Holt, VP of Economics, Scotia Capital (Montreal Gazette)
- “We anticipate gradual 25-basis point increases at each of the next five Bank of Canada fixed rate announcements through 2010.” — TD economist, Diana Petramala. (Globe & Mail)
- “This statement marks a dramatic change in tone by the bank, and doesn't rule out possible 50 basis point moves." — Douglas Porter, Deputy Chief Economist, BMO Capital Markets. (CTV)
- A “moderate growth track [will] allow the BoC to stick with only 25 basis point moves and to take a pause on rate hikes after October.” – CIBC Chief Economist, Avery Shenfeld. (Vancouver Sun)

The same analysts polled by Reuters above 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 Years, give or take 25 bps. (Prime rate is 2.25% today)

More on the Reuter’s Poll…