RateSupermarket.ca Rate Outlook Panel calls for fixed mortgage rate increase, just in time for the holidays
Fall borrowers should take advantage of today’s pre-approvals and rate holds; fixed mortgage rates are expected to tick slightly higher this season. However, any rise will be gradual, and Canada’s lending landscape will remain ultra-competitive throughout November.
Variable borrowers can expect stability as no movement is anticipated in the upcoming December Bank of Canada interest rate announcement.
Fixed Mortgage Rates: Up
Expect to see slightly higher fixed rates this season as lenders adjust their once-rock-bottom discounts in response to growing funding costs. This occurs as Government of Canada bond yields, which set the pricing for fixed rates in Canada, rise in anticipation of a U.S. rate hike. The rise is also the result of investor reaction to the new Liberal government’s three-year deficit mandate, which will rely heavily on national debt for increased infrastructure investment.
Also read: How Bond Yields Affect Fixed Mortgage Rates>
Rising rates in the U.S. look increasingly likely as economic conditions improve; markets have priced in a 72 per cent chance of an increase in the upcoming FOMC December meeting. The U.S. Federal Reserve has stirred speculation by referring to the factors needed “to raise the target range at the next meeting.” To specifically refer to the upcoming December announcement as a potential trigger point is notable, prompting bond investors north and south of the border to sell in order to avoid devaluation in their investments. This has driven yields and fixed rates higher in the short term.
Variable Mortgage Rates: Unchanged
Despite rumblings of a rise south to the border, Canada’s central bank is expected to remain pat until well into 2016, supporting post-recession economic growth with low variable interest rates. While the latest job numbers show resiliency, the BoC is in no position to wean Canadians off the low cost of borrowing established earlier this year, meaning a rate hike is off the table for the medium term.
Cutting rates is also unlikely, as a persistently strong U.S. dollar has weakened the loonie sufficiently to support trade and non-energy industries, which are expected to drive economic growth moving forward.
Click here to read the full November Mortgage Rate Outlook Panel>