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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?

September 2010 Overall Summary

No movement in mortgage rates for September. Despite the fact that we are already seeing lower fixed mortgage rates than the ones that were here prior to the most recent rate increases, these new low fixed rates will stick around and might even drop further.

Coupled with the Mortgage Rate Outlook Panel's belief that the Bank of Canada won't increase rates again on September 8, holding variable mortgage rates steady, results in a flat mortgage rate environment for September 2010.

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Canadian consumers were handed a treat when fixed mortgage rates dropped back down to historic low levels in August. Our panel of experts believe Sept will hold a similar story.

A series of lower than expected numbers from both Canada and the US reveal increasing economic weaknesses, which have dampened the Canadian bond market and put a lid on fixed mortgage rates for the time being. As well, a worse than expected retraction in the housing market has left banks fighting for new mortgage clients, and with less borrowers out there the competition will heat up; a perfect environment for price cutting.

We've seen economic predictions change on a dime over the past few months and it's happened again. Just last month our panel of experts were confident that the Bank of Canada would increase interest rates at their next rate meeting on September 8th, now that doesn't seem likely. The economic axis has shifted again and due to a staggering drop in GDP announced at the end of August, a rate increase is no longer on the cards this month, so variable mortgage rates are expected to stay where they are.

Video Summary - September 2010

This Month's Panelists

Dan Eisner - President, True North Mortgage

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Explanation: even slightly positive news is pushing bond yields higher off of historically very low numbers. Mortgage rates my not get a lot higher but they are certainly not going lower.

Variable rates will remain very attractive.

George Hugh - President, Taurus Mortgage Capital

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The slowdown in residential mortgage activity in Canada was correctly predicted, but for the most part it has slowed beyond expectations. We are already seeing lower mortgage rates than the ones that were here prior to the most recent rate increases. This trend will continue as it is being fuelled by a slowing market and excess demand for mortgage assets by the banks. No matter how you look at it, consumers will be the big winners!

Profitability on variable rate mortgages is beginning to disappear. With fixed rate mortgage pricing on the decline, the appeal of VRM mortgages is not as prevalent. Expect VRM pricing to stay where it is especially in the near term.

Elisseos Iriotakis - President, Safebridge Financial

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There have been a number of weak economic reports released over the last few weeks which would indicate we are not going to see any kind of rate increase anytime soon. In fact the bond market has been showing us that confidence in the economy has been dwindling for the last two months, thus a drop in longer term bonds by approximately 60 basis points. This drop has translated into more or less an equivalent decrease in longer term fixed rates over this same period of time and for this reason I feel we will see a cooling off period and a fairly level rate environment over the next 30 - 45 days.

Two weeks ago I would have said an increase of .25% for sure but with the recent weakening in the economy, Governor Carney may be best to sit pat. More so to avoid any negative press and to avoid derailing what little momentum the consumer may have. However, I wouldn't be surprised if he did raise the prime lending rate by .25%, but if so, this would be his last for a prolonged period of time; something like 9 - 12 months in order to keep consistent with the time frame that the U.S. is expected to start hiking rates.

Dr. Ian Lee - Program Director, Carleton University

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The latest numbers from both Canada and the US are trending downward revealing increasing weakness. There is an increasing risk of a double dip recession in the US as both fiscal policy and monetary policy seem to have run out of bullets. While Goldman estimates a double dip at 25%, Paul Krugman estates 40% and the trenchant David Rosenberg estimates over 50%. Residential sales and prices are now declining. Thus, there is a significantly greater supply chasing a decreasing number of mortgage borrowers, suggesting price cutting or decreases in the offered fixed mortgage rate.

While the consensus over the summer was another rate increase by the Bank of Canada in September, with the latest awful growth and job numbers in the US, the anaemic economic numbers in Canada and core inflation down to 1.6% (in Canada), it seems increasingly likely that the Bank of Canada will not raise rates this September. Moreover, it is very clear that in the US, consumers are deleveraging in a major way with $6 trillion to go, per Rosenberg. Due to the integration and similarity of the two economies and that Canadian consumers are also over leveraged, it seems that it is only a question of time before Canadian consumers follow the American consumer and start to deleverage and cut spending on everything - including realty expenditures.

Larry Macdonald - Economist, Canadian Business

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Deflation worries and risk aversion are holding yields down in bond market.

Bank of Canada expected to raise overnight rate in September.