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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?

October 2010 Overall Summary

The outlook for the month of October is unanimous; mortgage rates across the board will remain level.

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Despite lower bond yields due to slowing economic growth and deflation worries, fixed mortgage rates are not expected to decrease any further. Lenders have already tightened their belts by squeezing margins, any extra decreases are not expected to stimulate housing activity enough to make it worth while; so fixed mortgage rates will remain at current levels for the immediate future.

Economic growth is slowing by more than the Bank of Canada projected in its last Monetary Policy Report. GDP growth is declining, the US continues to show signs of weaknesses, and home purchases continue to fall. As a result, our panel members expect the Central Bank to hold off on raising interest rates further following their next meeting on October 19th.

Video Summary - October 2010

This Month's Panelists

Dan Eisner - President, True North Mortgage

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Bond yields be damned. Banks are eager to meet their budgets and are sharpening their pencils.

Variable rates will remain flat as a prairie highway.

George Hugh - President, Taurus Mortgage Capital

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It is really quite amazing to see the volatility in interest rate forecasts as we move from month to month. Over the most recent past, we had many believing that we were destined for sharp rate increases, today we see many suggesting that we will continue in the current environment of low interest rates for the foreseeable future. Let us not forget, rates are at historical lows, I do not expect them to go any lower now or possibly in our lifetimes, did I say that? The reality is that margins are being squeezed, and that by lowering rates any further, this will not be enough to simulate the current levels of housing activity.

Profitability on variable rate mortgages have disappeared, even Houdini would be proud. Expect VRM pricing to stay where it is!

Gregory Klump - Chief Economist, CREA

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Slowing economic growth and a weakening inflation outlook spell lower yields for bonds. The bond market has already factored in dimming economic prospects. With the five-year mortgage interest rate closely tied to the five-year benchmark bond yield, mortgage rates have also dropped close to lows seen earlier in the year. A downgraded economic growth outlook and dormant inflation mean that long term mortgage rates are going nowhere fast.

Economic growth is slowing by more than the Bank of Canada projected in its last Monetary Policy Report. Expect the Bank's policy interest rate announcement on October 19 to keep its trend-setting overnight lending rate on hold, and signal lowered expectations in advance of its Monetary Policy Report update a few days later.

Dr. Ian Lee - Program Director, Carleton University

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The 5 year Government of Canada bond rate has dropped to its lowest level in the last 17 months. In conjunction with declining realty sales, this strongly suggests an excess of supply over demand for mortgage lending, thereby placing downward pressure on the 5 year fixed mortgage rate.

Bloomberg surveyed - (http://www.bloomberg.com/news/2010-10-05/yield-forecasts-tumble-as-carney-rate-increase-pushed-back-canada-credit.html) fourteen Canadian economists, who predict no further Bank of Canada increases until Q2 of 2011.

Given the softness in aggregate demand represented in the declining GDP growth numbers, the continued weakness in the US, low levels of inflation and a continuing decline in residential home purchases, it is extremely unlikely that the Bank of Canada will increase interest rates on Oct. 19.

Larry Macdonald - Economist, Canadian Business

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

Bank of Canada likely finished for now with raising the overnight rate.