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Mortgage Rate Outlook Panel

Our panel of mortgage experts share their views on Canadian mortgage rate trends each month by answering this question: What is your outlook for Canadian mortgage rates over the next 30-45 days?

January 2010 Overall Summary

Panel divided on the movement for fixed rates, variable rates to remain unchanged.

Fixed RatesUnchanged Variable RatesUnchanged

Although 40% of our panel members think fixed rates will begin to creep up this month, there is a stronger argument that they will remain unchanged in the short term. There is uncertainty about whether or not recent fluctuations in bond yields will result in increased fixed rates. With some lenders still hungry for business, and banks likely to maintain caution, expect fixed rates to stay as they are for the time being.

80% of our panel members agree that variable mortgage rates will remain unchanged in the short term. Government talks about increased household debt and possible intervention by increasing down payments and reducing the maximum amortization period indicate that interest rates are unlikely to increase when the BoC meets again on January 19th. Banks are also expected to kick off the New Year by making a grab for market share by discounting their rates off prime.

This Month's Panelists

Dan Eisner - President, True North Mortgage

Fixed RatesUnchanged Variable RatesDown

Some say the Canadian bond market is bouncing around unpredictably right now, I prefer to think of it as light-hearted frolicking. Either way Banks are being cautions and won't be lowering rates in the next 30 - 45 days.

It is a New Year and banks want to kick it off with lots of mortgage volume. Thus, more banks are going to discount their rates off of prime. That's good for home buyers!

George Hugh - President, Taurus Mortgage Capital

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The past couple of months have witnessed very volatile 5 year bond yields ranging from a low of 2.38% to a high of 2.90% in mid October. With the current 5 year bond rate at 2.73% this has resulted in narrowing spreads for all lenders. Many were not convinced that these higher yields were warranted due to the uncertainty that remained in the global financial markets.

Throughout the media we are hearing more and more that the road to recovery was well on its way. Not only were we on the road to recovery, it was REAL and heaven forbid, SUSTAINABLE! All of a sudden, we were headed for higher rates and the possibility of inflationary concerns are back in the mix.

No matter how you interpret this, the reality is that lenders are still very hungry for mortgage product so will end up absorbing reduced spreads and keeping rates stable where they currently are over the near term. My expectations are that yields will stabilize at these levels but you just never know. If you had any reason to think that rates were going to decline any further, throw those thoughts in the garbage.

The variable rates are likely to remain unchanged.

Gregory Klump - Chief Economist, CREA

Fixed RatesUp Variable RatesUnchanged

Bond yields have crept higher over the past month, but mortgage rates have not. Yields may rise further if job growth last December comes in stronger than expected. If yields rise further, expect fixed mortgage rates to bump up slightly. Bond yield and mortgage rate increases are unlikely to be sustained, since economic growth is expected to be mediocre over the coming months.

The Bank of Canada continues to repeat its commitment to keep its trend-setting overnight lending rate on hold until the second half of 2010, conditional on the inflation outlook. Accordingly, variable mortgage rates will remain unchanged over the next 30-45 days.

Dr. Ian Lee - Program Director, Carleton University

Fixed RatesUnchanged Variable RatesUnchanged

Fixed mortgage rates change as bond yields change. Reflecting the overall relatively weak state of the economy, we have not seen significant changes in bond yields. For this reason, I do not expect a change in fixed mortgage rates in the next 30 days. However, we may see upward movement in late winter or early spring 2010, as the economy continues its recovery and this is reflected in bond yields.

While the real estate market and thus demand for mortgages has been unusually strong, other sectors in the economy have experienced more tepid growth which affects incomes. Moreover, continued warnings by the Governor of the Bank of Canada concerning over indebted consumers and a yearend warning by the Minister of Finance that he is willing to intervene to increase the down payment and reduce the amortization, will moderate mortgage demand.

Moreover, a premature interest rate increase by the Bank of Canada will slow the modest recovery and further strengthen the loonie. Also see the excellent analysis by CIBC Economist Benjamin Tal, "Canadian Mortgage Debt: A closer look", December 18, 2009. For these reasons, I do not expect the Bank of Canada to raise interest rates in the next 30 days.

Garth Turner - Author, Former MP

Fixed RatesDown Variable RatesUnchanged

There's a lot in the air. Reasons to believe that coming off a gargantuan December sales month, the housing market will be propelled ahead as panicked buyers scramble to escape the Three Horsemen:

(1) HST introduction into the two hottest housing sectors - Ontario and BC

(2) Jim Flaherty's 5/35 repentance as he ups insurable loan down payments to 10%

(3) Mark Carney's long-awaited and much-anticipated BoC rate hike.

This is why the January-February period may be hot, with a huge volume of new mortgage originations, and a slight downward bias in rates, especially at the long end as wise lenders guide clients into loans they might actually be able to renew in 2015.

So, my forecast: Five-year money down about 20 basis points in the next month.

No change in VRMs. Then the fun starts.