After the financial meltdown of 2008, things were not 100 percent economically fantastic here in Canada, but it was nothing like in the U.S. Many of us felt pretty smug about it, really. Our unemployment levels weren’t so bad, our housing prices stayed firm and our banks were a model of efficiency and best practices.

Or so we thought. Last week, the Canadian Centre for Policy Alternatives revealed that Canadian banks got as much as $114 billion dollars in secret government bailout money. It was a shocking allegation, and one that not everyone believes.

Here’s what happened.

The Bailout Claim

In The Big Banks’ Big Secret, written by David Macdonald, chief economist at the CCPA, it says between 2008 and 2010, the government bolstered our banks to the tune of $114 billion, an amount that equals $3,400 for every Canadian. That amount is higher than the per capita support given in the highly publicized U.S. bank bailouts. This money came through the Canada Mortgage and Housing Corporation (CMHC), the Bank of Canada and the U.S. Federal Reserve.  For instance, the CMHC bought $69 billion worth of mortgages from banks during this period. In the report, Macdonald also says three of our major banks were totally underwater during that time.

However, the report — which was culled from financial documents of the above organizations — also reveals Canadian banks pulled in $27 billion in profits as a group and CEO compensation went up 19 per cent.

The Other Side

The Canadian Bankers’ Association and Finance Minister Jim Flaherty have said many of the details of the report are wrong.

For instance, the CBA has been quoted saying that banks were in no way in serious financial trouble at that time and that money was moved around to deal with liquidity — simply making sure the banks had enough cash on hand — not bailout money. All the federal banks were trying to flood the system with money during that time by increasing loans to banks, all to keep money moving during a tough time.

As well, the CBA has been quoted saying the CMHC bought mortgages, but they were fully secured and insured good loans. This was through the publicized Insured Mortgage Purchase Program, introduced in 2009, and the CBA reports that the CMHC made $2.5 billion via interest by buying these mortgages.

The government has said any money given to banks to deal with liquidity issues came in the form of loans and those loans have already been paid back.

The Bottom Line

Understanding economics on a federal or even global scale is a tough thing for everyday consumers. In fact, one of the criticisms of the financial industry was that a lack of understanding of the markets led to the economic crisis itself — folks on Wall Street were buying bonds and loans they did not truly understand.

It is important that organizations like the CCPA look into government documents and try to unravel the complexities of what goes on in good times and bad. We consumers need to know what happens at our banks, particularly since these organizations are massively profitable and charge us highly for their services.

In this case, it is hard to separate the propaganda from the real economic facts. We may suspect some wrongdoings here, or we may believe our system is being run responsibly. In the end, all we can do is educate ourselves and keep asking our government and big businesses to be accountable no matter what’s going on in the world.

RateSupermarket.ca’s Expert Mortgage Panel Predicts Status Quo on Mortgage Rates

Toronto, ON – (May 10, 2012): Increased uncertainty in Europe and the wider global economy will cause Canada to sit back and wait before making any major changes to interest rates that could potentially derail its economic growth. While this waiting game plays out, RateSupermarket.ca’s panel of mortgage experts expect both fixed and variable mortgage rates to remain unchanged in the short term.

Fixed mortgage rates: Unchanged

Demand for mortgages is moderating in many parts of the country, and there is decreased need for competitive discounting from big lenders to maintain mortgage market share. All these factors point to one conclusion – little change is on the horizon for fixed mortgage rates. Our panel of experts expect fixed rates to remain level for the next 30-45 days.

Variable mortgage rates: Unchanged

The recent French and Greek elections raise concern for the future stability of the Eurozone. Will Greece exit the European Union?  If so, how many other debt ridden countries will follow? With so many questions unanswered, our Mortgage Rate Outlook Panel members think the Bank of Canada is unlikely to risk rocking the boat by increasing interest rates any time soon.

This, coupled with the fact that discounts to the Prime rate are not expected to budge given the lack of interest in variable rate terms at the moment, means that variable mortgage rates will stay where they are in the short term.

About the Mortgage Rate Outlook Panel

The Panel includes some of the country’s top mortgage experts, and helps Canadian consumers make informed decisions by offering a short-term outlook for fixed and variable mortgage rates.

This month’s panel members:

• Mark Kocaurek, Senior Vice President, Treasury & Lending (Chief Lending Officer) of ING DIRECT Canada
• Dr. Ian Lee, Director of MBA Program, Sprott School of Business, Carleton University
• Wayne Spinney, Mortgage Agent, Centum Mortgage Professionals
• Dan Eisner, MBA. AMP. President, True North Mortgage

About RateSupermarket.ca (www.ratesupermarket.ca)

RateSupermarket.ca is the largest impartial rate comparison service for personal finance products in Canada. Founded in May of 2008, their easy to use comparison engine provides much needed transparency to the Canadian financial market and allows visitors to quickly find the best mortgage rates. Their Mortgage Tool App for the iPhone also allows house hunters to compare mortgage rates using their Smartphone. Over 1.5M Canadians have turned to RateSupermarket.ca to save money on their mortgage, insurance, banking, credit cards and GICs.

The Bank of Canada is hinting a hike in the overnight lending rate is coming soon. This move will affect the payments on variable mortgages, lines of credit or any debt connected to the floating rate.

Short-term overnight rates have been stalled at 1 per cent since September 2010 and the Bank of Canada knows they can’t stay there for too much longer. It’s because Canadians continue to take on more cheap debt and inflationary pressures are starting to creep in.  More recently the Central Bank noted improved prospects for both the global economy and ours. Indicating Canadians could handle a higher cost of borrowing.

If you’re worried about your ability to service debt in a higher interest rate environment, there are plenty of steps you can take right now to prepare.

Fix your Mortgage Rate

If you’re on a variable rate mortgage you may be able to lock into a fixed rate without any costs. Talk to a mortgage expert to see what your options are. With your rate fixed for five years you can more easily budget and manage your money over that time.

Start Paying More Principal Down

The smaller your debt is the easier it will be to handle.  If you’re carrying a large mortgage or a substantial line of credit, start paying down your loan as aggressively as possible. Every cent you put in today will save you money down the road, especially when rates start to rise and that money gets more expensive to carry.  This is true even if your mortgage term is fixed, because you will be better prepared when it comes up for renewal.

Don’t Take on Any New Liabilities

With interest rates so low, there may be a temptation to take on more debt. But if you’re already carrying a high load, this is not the time to start major home renovations or buy a new car. If possible start saving for those new purchases so you can avoid paying any interest at all. This is a good habit to have no matter where interest rates stand.

Say NO to an Expensive Home

If you’re out shopping for a mortgage, don’t take on the maximum your bank is offering. There is an easy method to figure out what you can afford. Calculate your monthly household income after taxes. Ideally your mortgage payments should represent 25 to 30 per cent of that number. Aim to have your payments around 25 per cent for now so they won’t exceed that comfortable amount when rates rise. If your ratios are too high then you need to find a less expensive house.

Base your Payments on a Higher Rate

Make the lifestyle changes you need to cut back on your spending now. Don’t wait until rates go up to see where you can save. I recommend paying your mortgage at a rate of at least 5 percent. This will help you adjust your budget early to handle those higher payments later.

Stay Invested in Canada

Higher interest rates will mean a stronger Loonie. If you’re looking to convert any cash to U.S. dollars holding off for a year could save you a great deal of money. This is especially true for anyone buying real estate in the U.S. My advice, start saving your cash in Canadian dollars, you could get a better exchange rate at the beginning of next year when rates are expected to rise.

Don’t Forget About “Normal” Conditions

The Bank of Canada likes the overnight lending rate to be around 6 per cent. Meaning in normal economic times commercial banks will offer a prime rate closer to 8 per cent. Don’t worry that isn’t happening anytime soon. But it’s important to keep in mind that in the last 30 years Canada’s interest rate has fluctuated dramatically.  In 1980 it reached an historical high of 18 per cent and a record low of 0.25 per cent in April of 2009.

Who is Most Vulnerable

Anyone holding an adjustable or variable rate mortgage will be affected, as the banks will raise prime from the current level of 3 per cent. Also if you have a floating rate on your personal debt you should also be aware of the higher cost of borrowing and what that means to your budget. A hike is still months away and taking these appropriate steps now will protect you and your family from rising costs.

In the News this Week: No Changes to the Overnight Lending Rate

Earlier this week (Tuesday April 17th) the Bank of Canada announced that it will maintain its target for the overnight rate.  This marked the 13^th consecutive time that rates have been left alone over the past 19 months.  Although the Canadian economy has exceeded the Bank’s expectations from January and the U.S.’s own recovery has been on the up and up, it all wasn’t enough to have the BOC increase their overnight lending rate which remains steady at 1 per cent.  This pleases mortgage brokers and consumers alike as the prime lending rate also remains at the 3 per cent level.

BUYER BEWARE … Shedding Some Light on the Cash Back Mortgage

You might be wondering what a cash back mortgage is – it is exactly what it sounds like.  When your mortgage funds you receive a set percentage back in cash to go towards, well whatever you want!  Some will turn around and use a 5 per cent cash back amount as their down payment, a sly move around the minimum down payment required to qualify for a mortgage in Canada, unless you are using a private lender of course.  The pro with this type of mortgage is that you can do whatever you want with the cash back!

The Cons: Nothing Comes for Free

I did some research around cash back mortgage rates among the major banks and found that on the surface, they are priced at par with regular fixed mortgage rates.  This makes them quite attractive to the average consumer.  However, when taking a deeper look I found out that the banks only offer discretionary pricing on their regular mortgage products and not on cash back mortgages; making the effective cash back mortgage rates higher than the standard fixed rates.  No room for negotiating a cash back rate!

If paying the posted rate isn’t bad enough, try getting out of a cash back mortgage.  Is it possible?  Yes!  Is it difficult?  Not really.  Is it expensive?  OH YA!  How do you feel about your first born or an arm and a leg?  These are things you may need to give up in order to pay out the penalty for breaking a cash back mortgage.  Sure the $9,000 in your pocket on closing was nice, but try paying it back on top of the standard IRD/3 month interest penalty charge.  It will most definitely cost you a pretty penny.

Claims to “pay off your mortgage 11 years sooner” with a Cash Back Mortgage?!

One of the major banks has advertised that you can pay off your mortgage 11 years faster with a 5 year fixed cash back mortgage at 4.24 per cent.  Not only will you pay off your mortgage faster but they will even give you $4,000 cash at closing (this is based on a 2 per cent cash back amount on a $200,000 mortgage).  That sounds great doesn’t it, so what’s the catch?

The catch is that their scenario is conditional upon your ability to pay more – funny … when you pay more you pay off your mortgage faster!  So I guess paying off your mortgage 11 years sooner really isn’t dependent on the advertised cash back product, which offers a higher rate and is more expensive if you decide to break it down the road.  With the same suggested principals you could pay off any mortgage faster, so why settle for a higher rate!?

The Offer Under the Microscope

In order to be mortgage free (based on $200,000 principal, 4.24 per cent 5 year fixed rate, 25 year amortization and monthly payments) 11 years earlier you have to increase your monthly payment frequency to accelerated bi-weekly payments, then increase your bi-weekly payments by nearly 9.5 per cent and finally make lump-sum payments of $3,000 per year.

From Scenario One – Two: By increasing the payment frequency from monthly payments to accelerated bi-weekly you can shave over 3 years off of your mortgage (mind you, the equivalent monthly payment translates to $1,168.10 which is nearly $90.00 extra each month).

From Scenario Two – Three: By increasing your bi-weekly accelerated payment to $590.00 (9.44 per cent increase) you can pay off your mortgage nearly 5 and a half years earlier (note: the equivalent monthly payment now translates to $1,278.33 which is over $200.00 extra each month).

From Scenario Three – Four: Now that you’ve increased your total annual principal and interest payments by approximately $2,400.00, this example also requires you to pay an additional lump sum payment of $3,000 per year.  By doing this, you will decrease your total amortization to 14.8 years from the original 25 years.

Bottom line:  It isn’t the mortgage product that is helping you to shave years off of your mortgage, it is taking advantage of pre-payment privileges which you can do with any product!

RateSupermarket.ca Week in Review

Another week of little to no movements in the best mortgage rates across Canada.  Little on the variable front and no movements on the fixed front.  The single change over the last week was an increase in the 5 year variable closed rate, up 5 bps to 2.75 per cent.  Do you want to know when the best mortgage rates change?  Be the first to know and sign up for RateAlert, RateSupermarket.ca will e-mail you a daily digest of the mortgage rates that have changed in your area!

Still remaining in the top 1 and 2 spot for most frequently searched mortgages are 5 year fixed (38.5 per cent of visitors searched for this rate) and the 5 year variable (32.9 per cent).  Gaining in popularity over the last week is the 3 year fixed rate, last week 4.8 per cent of visitors were searching for this rate and this week 5.5 per cent have.  Have you created an account on RateSupermarket.ca yet?  Get to it!  It allows you to save your searches so that you can easily sign-in and see the current best mortgage rate for your needs.

Today the Bank of Canada announced that once again (for the 13^th consecutive time over the past 19 months) that there will be no change to the overnight lending rate.  This pleases variable rate mortgage holders since there are no alterations to the bank’s Prime lending rate and therefore no increase to their own mortgage rate and monthly mortgage payments.

The Canadian economy is exceeding the Bank’s expectations from January.  The U.S. has contributed to the overall healthier economic picture in Canada since their own recovery has been more pronounced in recent months and their financial conditions have improved as well. An improvement in Canadian consumer confidence has unfortunately increased the level of household debt, which remains the greatest domestic risk in Canada.  Net exports are forecasted to remain weak due to increased competition, a diminishing global demand and the strength of the Canadian dollar.

A full update of the Bank’s economic and inflationary outlook will be published tomorrow and the next meeting to discuss changes to the overnight lending rate is scheduled for June 5^th, 2012.

Increase to the Bank of Canada’s Qualifying Interest Rate

The Bank of Canada’s 20bps qualifying interest rate increase took effect Sunday April 8^th, 2012 at 11:59pm and currently sits at 5.44 per cent. This is one more tactic implemented to dampen the spending habits and enlarged credit balances Canadians are facing.  To keep up to date on key economic figures, check out RatePulse!

So what does this mean for you? Although you might be applying for a low rate (like a 5 year variable rate mortgage priced 20bps under prime, or a 1 year fixed rate at 2.39 per cent), your Gross Debt Service (GDS) and Total Debt Service (TDS) ratios are still calculated based on the qualifying rate. Yes this does make it harder to get approved, but it really benefits all parties involved in the mortgage!

What Qualifying Rate Do Underwriters Use to Qualify You?

Short answer? It depends. If you’re applying for a variable rate mortgage, the Bank of Canada’s qualifying rate is most commonly used. If you’re applying for a fixed rate, it depends on a variety of factors based on the lender.

Some lenders will decipher your qualifying rate based on whether your mortgage is considered high ratio or conventional.  Generally speaking if your mortgage is considered high ratio you will be adjudicated using the BOC’s qualifying rate or the greater of your contract rate and the lender’s 5 year posted rate.  Whereas with a conventional mortgage lenders will either use their 5 year fixed posted rate, their 3 year fixed posted rate or consider the greater rate between your contract rate and the posted rate.

Another method used by underwriters is they consider the term of your mortgage.  If you have a term that is 5 years or greater, you can use your rate to calculate your debt servicing ratios.  However, if you have a term that is less than 5 years you are looking at the BOC’s benchmark rate.

Using a Higher Rate to Qualify Benefits Everyone!?

Using a rate that is higher than your contract rate quite obviously benefits the lender since they are covering their tails and mitigating some of the risk involved in deciding whether or not you will be able to sustain mortgage payments in the future.  They want to ensure that if/when rates increase (especially in the case of variable rate mortgages, which are designed to fluctuate with changing market conditions), your ability to pay off your mortgage is not compromised.

Inflating the qualifying rate also provides a form of insurance to you, the borrower, for the same reasons.  Think about it…let’s say you were approved for a 3 year fixed mortgage at 3.39 per cent and your ratios were brimming at 32/42 GDS/TDS at the time of approval.  Based on a $300,000 mortgage and 25 year amortization, your monthly payments work out to be $1,480.45.  At maturity your balance will be $275,834.68, however over the last 3 years interest rates have increased.  Now a 3 year fixed rate sits at 4.25 per cent and your new monthly payments are $1,604.46 (nearly $125 higher), plus your property taxes have increased, you have baby number two on the way, and your 15 year old vehicle is ready for the junk yard.  You wouldn’t be in such a bind if you were originally qualified (and perhaps declined) with a higher rate.

April 2012 Mortgage Rate Outlook

This month’s panel of mortgage experts think that fixed rates will increase and variable rates will remain unchanged.

The ideas behind the nearly unanimous outlook of an increase to fixed rates include: the upward trending bond yields (due to global economic uncertainty) which would signal similar movements to fixed rates, the end of the mortgage pricing war, and the unsustainable profit margins that the 2.99 environment created.

The mortgage panel agreed upon no changes to the variable rates based on the idea that the overnight lending rate will not be changed next week (following a rate announcement on April 17^th from the BOC).  Variable rate pricing is thought to stay in and around prime.  Recovery in the Canadian market has been slow, inflation has been stable, and the U.S. Federal Reserve isn’t looking to increase their rates until 2014.  This surely explains why Carney is limited to implementing changes and must keep Canadian interest rates in check with the American (rock bottom) rates.

RateSupermarket.ca Week in Review

Psst!!  Do you want to know when the best mortgage rates change?  Be the first to know and sign up for RateAlert, RateSupermarket.ca will e-mail you a daily digest of the mortgage rates that have changed in your area!

Over the last week there were no big movements in the best mortgage rates.  In fact, all of the rates remained unchanged with the exception of the 5 year variable rate mortgage which actually decreased by 5bps.

More and more people have moved away from searching the 5 year closed fixed and variable rates over the last week, although they remain the top two hottest searches.  An increasingly number of RateSupermarket.ca’s visitors are searching the 10 year fixed rate (7.3 per cent), the 3 year fixed rate (4.8 per cent) and the 4 year fixed rate (4.4 per cent).

RateSupermarket.ca’s Expert Mortgage Panel Predicts Hike in Fixed Rates, but Stability in Variable Rates This Month

TORONTO, ONTARIO–(April 10, 2012) – The spring real estate frenzy has started early this year, perhaps due in part to record low fixed mortgage rates in March. Sadly for borrowers, all good things must come to an end. To paraphrase the old saying, “what goes down must come back up.” As such, fixed rates are expected to rise this month, according to some experts.

Conversely, RateSupermarket.ca‘s Mortgage Rate Outlook Panel is anticipating variable mortgage rates to remain unchanged in April.

Fixed Mortgage Rates: Up

The price wars that sent fixed mortgage rates to historical lows last month seem to be over (for now). The record low rates were an attempt to snap up market share early in the year and get a jump on the peak home buying season, but those rates were unsustainable according to the Expert Panel.

With the increase in bond yields and persistent political and media attention around house prices and consumer debt levels, we should see fixed mortgage rates increase during the month of April.

Variable Mortgage Rates: Unchanged

RateSupermarket.ca‘s Panel members believe that inflation remains in check, the provincial election is heating up in Alberta, and the risks to global economic growth remain biased to the downside.  All these factors combined mean the Bank of Canada is unlikely to make any change to interest rates when they meet on April 17.  As a result, Prime rates and discounts off of variable rate mortgages will remain stable in the short-term.

To read all the detailed commentary from our Panel Members, please visit:

http://www.ratesupermarket.ca/mortgage_rate_outlook_panel/

About the Mortgage Rate Outlook Panel

The Panel includes some of the country’s top mortgage experts, and helps Canadian consumers make informed decisions by offering a short-term outlook for fixed and variable mortgage rates.

This month’s panel members:

• Mark Kocaurek, Senior Vice President, Treasury & Lending (Chief Lending Officer) of ING DIRECT Canada
• George Hugh, President and Co-founder, Taurus Mortgage Capital.
• Dr. Ian Lee, Director of MBA Program, Sprott School of Business, Carleton University
• Wayne Spinney, Mortgage Agent, Centum Mortgage Professionals
• Dan Eisner, MBA. AMP. President, True North Mortgage

About RateSupermarket.ca (www.ratesupermarket.ca)

RateSupermarket.ca is the largest impartial rate comparison service for personal finance products in Canada. Founded in May of 2008, their easy to use comparison engine provides much needed transparency to the Canadian financial market and allows visitors to quickly find the best mortgage rates. Their Mortgage Tool App for the iPhone also allows house hunters to compare mortgage rates using their Smartphone. Over 2M Canadians have turned to RateSupermarket.ca to save money on their mortgage, insurance, credit cards and GICs.

Recent Study Findings: How Canadians Feel About a 2 per cent Increase in Mortgage Rates

A survey completed by Leger Marketing for BMO, found that 43 per cent of Canadian homeowners would be in a bind if interest rates were to increase.  4 out of 10 claimed they would feel pressure if rates would rise as little as two per cent while 1 out of 5 said the same two per cent increase would hurt their ability to service their mortgage.  23 per cent were unsure how a rate hike would affect them while only 57 per cent felt that their mortgages would still be affordable if mortgage rates increase.

This survey which was completed by 1500 respondents was conducted two weeks prior to BMO dropping their 5 year fixed closed rate to the historically low 2.99 per cent.  The survey results were disclosed the day before this promotional rate ended last week.  Since then, all of the major banks have followed BMO’s suit and ended their own 4 and 5 year promotional pricing as well.  But how likely is a 2 per cent increase in mortgage rates?

What Does the Future Hold?

Banks already began raising variable mortgage rates and offering less of a discount off of prime, long gone are the prime minus 75 bps days.  The changes made to variable rate pricing are independent of the fact that the Bank of Canada hasn’t implemented any changes to the overnight lending rate at this point which directly influences the prime lending rate.

According to economists the overnight rate will likely end up in the 3-4 per cent rage, some estimate by 2013 while others forecast no big movements at least until 2014 when the U.S. Federal Reserve is expected to make their first rate increase.  The idea of rates increasing sooner than later stems from the fact that both Finance Minister Jim Flaherty and Bank of Canada Governor Mark Carney have clearly stated their concerns with the heightened levels of household debt levels (recent report stating debt to disposable income levels around 150 per cent).

On the fixed side of things, the promotional 2.99s have rocked recent pricing strategies and created a seemingly unnatural environment in the mortgage market.  Since the beginning of 2012, the 5 year Government of Canada benchmark bond yield has increased over 26 per cent; and although the yield jumps around from day to day there is a notable upward trend which should signal an increase in fixed rates.

Talks of a Crash Should Cease: Stress Testing Canadian Households

The Bank of Canada has developed a “stress test” to evaluate how any adverse economic circumstances (such as an increase in interest rates) would affect the distribution of debt.  The BOC examines each scenario and considers how changes in interest rates and the unemployment rate affects consumer credit and the impact on debt servicing ratios (GDS/TDS).

The most recent stress test came out optimistic, the BOC is confident that Canadian households are in a good position to handle an economic shock.  In 2000, 8.4 per cent of households had debt-service ratios above 40 per cent and at that time Canada didn’t experience a crash like the American economy had.  The BOC ran a scenario for a 3 per cent increase in the unemployment rate and an increase alike in short term interest rates; the outcome is (not surprisingly) an increase in the number of households with high debt-servicing ratios (from 6.4 per cent in 2010, to roughly 7.5 per cent in 2013).

The C.D. Howe Institute suggests that the BOC’s stress test may actually underestimate the effects of tougher economic times on the Canadian economy since the increase in debt (especially for lower-middle income borrowers), means that consumers might be increasingly prone to bankruptcy after a job loss.  However, no one is anticipating a crash like the American housing market experienced.  Canadian lending standards are stricter than those of the U.S.A. and they continue to tighten with recent changes to mortgage insurance rules and reduced access to credit for riskier borrowers.

RateSupermarket.ca Week in Review

Over the last week we have seen movements in half of our rates and all but one were on the rise.  With the exception of the 1 year fixed dropping a mere 5 bps, the 5 year fixed (up 21 bps), 7 year fixed (up 4 bps), 10 year fixed (up 4 bps) and 3 year variable (up 5 bps) all increased.  The biggest mover was the 5 year fixed rate which ended last week on the best mortgage rates page at 2.98 per cent, jumped up 11 bps to 3.09 per cent last Friday, another 5 bps on Monday and a final 5 bps to end at 3.19 per cent on Wednesday.

The 5 year fixed mortgage rate remains the most popular rate, with 40.9 per cent of visitors searching for this rate.  The 5 year variable rate is the runner up with 33.9 per cent of visitors reviewing the offers for this type and term.  And also notable is the 10 year fixed rate with just over 7 per cent of visitors interested in this rate (7.1 per cent).  Since the drastic change over the 12 months in variable pricing from prime minus to in some cases exceeding prime and the fixed rate pricing doing the exact opposite (hitting rock bottom at 2.99 per cent twice since the beginning of this year alone), consumers are locking in and even considering the “insurance” that the 10 year fixed rates provide.  Most people are thinking they are likely going to have a mortgage for the next 10 years, so why not lock in a rate under 4 per cent!?

The Bank of Canada (BOC) announced today (March 8th, 2012) that the overnight lending rate will remain unchanged for the 12^th consecutive time over the last 18 months.  The last time the BOC made a change to the overnight lending rate was back in September of 2010 with an increase of 25 basis points.

The overnight rate currently lingers at 1 per cent.  The bank rate is at 1.25 per cent and the prime lending rate also remains at 3 per cent.

What the Experts are Saying

C.D. Howe Institute’s Monetary Policy Council (MPC) met earlier this week to discuss their ideas around a possible rate change and all 9 members had anticipated that there would be no change.  This is consistent with the message coming from the RateSupermarket.ca Mortgage Rate Outlook Panel members.  Interestingly enough, all members of the C.D. Howe are also forecasting no changes for the BOC’s meeting next month on the 17^th of April.

The 6 and 12 month opinions are mixed due to clashing philosophies as to where the state of the global and domestic economies will be as well as concerns about maintaining a domestic inflation rate around the target of 2 per cent; however the majority currently anticipate no adjustments will be made to the overnight rate over the next year.

The problem with raising rates too soon is the negative impact that it would have on the Canadian dollar and net exports, could our trading partners afford this increase?  Everyone hopes the worst is over in the United States since they have been reporting some healthier numbers, however policy changes are going to continue to happen throughout 2013 and no one is holding their breath.  There have also been signs of slowing growth in China, India, Brazil and Russia; now it’s the BOC’s turn to make a move and they’ve decided to hold steady.

It will be interesting to see how Canada maintains the moderate growth that it has been experiencing vs. how the rest of the world is keeping up. 

RateSupermarket.ca’s Expert Mortgage Panel Expects Moderate Increases to Fixed Mortgage Rates and Level Variable Rates Heading Into Spring

TORONTO, ONTARIO–(March 7, 2012) – With the spring real estate season on the horizon and historically low interest rates, the debate on the minds of those preparing for a mortgage is Fixed vs. Variable. Although the Fed has promised to keep their interest rates constant until 2013, in Canada  several factors can impact rate fluctuations, though in this market, likely not significantly.

Significant or not, RateSupermarket.ca‘s Mortgage Rate Outlook Panel is anticipating an increase in Fixed mortgage rates in March, albeit a moderate one. The Panel expects Variable rates to hold steady.

Fixed Mortgage Rates: Up

Since the beginning of February, we`ve seen bond yield creep up and few lenders have adjusted their rates accordingly.

This month our panel of mortgage experts foresee those increases being passed on in the form of moderately higher fixed mortgage rates.

But not to worry, it`s likely that any significant rate increases will be dampened by the prospect of a somber upcoming budget announcement with cuts expected to reach $4-8 billion annually including public servant layoffs.  The announcement will likely dampen demand for mortgage funding and further cool down the housing market.

Variable Mortgage Rates: Unchanged

The Bank of Canada meets on Thursday of this week (March 8th) for their next interest rate announcement.  Similar to the last 11 rate announcements, experts are not anticipating any change to the key overnight lending rate, and hence variable mortgage rates should remain unchanged.

Moving ahead of the U.S. and increasing our interest rates in Canada would increase the value of the Loonie, which in turn would slow exports and could send Canada into a recession.  This is a risk the Bank of Canada is not likely to take.

To read all the detailed commentary from our Panel Members, please visit:

http://www.ratesupermarket.ca/mortgage_rate_outlook_panel/

About the Mortgage Rate Outlook Panel

The Panel includes some of the country’s top mortgage experts, and helps Canadian consumers make informed decisions by offering a short-term outlook for fixed and variable mortgage rates.

This month’s panel members:

• Mark Kocaurek, Senior Vice President, Treasury & Lending (Chief Lending Officer) of ING DIRECT Canada
• Dr. Ian Lee, Director of MBA Program, Sprott School of Business, Carleton University
• Wayne Spinney, Mortgage Agent, Centum Mortgage Professionals
• Dan Eisner, MBA. AMP. President, True North Mortgage
• Elisseos Iriotakis, President, Safebridge Financial Group

About RateSupermarket.ca (www.ratesupermarket.ca)

RateSupermarket.ca is the largest impartial rate comparison service for personal finance products in Canada. Founded in May of 2008, their easy to use comparison engine provides much needed transparency to the Canadian financial market and allows visitors to quickly find the best mortgage rates. Their new Mortgage Tool App for the iPhone also allows house hunters to compare mortgage rates using their Smartphone. Over 1.5M Canadians have turned to RateSupermarket.ca to save money on their mortgage, insurance, credit cards and GICs.