RateSupermarket.ca’s expert mortgage panel calls for rate rise despite bond dive
There may be uncertain times ahead for mortgage borrowers, as banks and policy makers deviate from economic norms when pricing interest rates. Fixed-rate borrowers have already witnessed a slight pricing increase from some lenders, as new regulations squeeze profits. Meanwhile, economists are split on whether the Bank of Canada has another January rate cut up its sleeve. However, should a cut occur, it remains to be seen if the resulting discounts will ever reach consumers, as lenders pad their profit margins amid ongoing economic downturn.
Fixed Mortgage Rates: Up
New regulations introduced late last year will impact banks’ mortgage funding costs and borrowers’ capital requirements. As a result, some lenders, such as Royal Bank of Canada, have raised fixed mortgage rates slightly, despite strong demand for bonds, and lingering low yields. As lenders continue to face these increased costs, along with economic headwinds from a low loonie and oil prices, fixed mortgage rate discounts may become slightly less competitive.
Variable Mortgage Rates: Down
Rocky economy times may call for additional measures from the Bank of Canada. Oil’s persistent drop, coupled with lacklustre exports and manufacturing sectors, could prompt the central bank to take out yet another round of monetary policy insurance; economists have priced in the likelihood of a 25-basis point rate cut at 50 per cent in next week’s January interest rate announcement and Monetary Policy Report reveal.
Click here to read the entire January Mortgage Rate Outlook Panel.