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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?

November 2010 Overall Summary

November is looking very much like October with our panel of experts predicting no change to fixed or variable mortgage rates.

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The big five banks have finished their fiscal year ends so there is little reason to continue what has been a powerful fight for market share over the past few months which has helped keep mortgage rates low. However, a significant decrease in demand for mortgages, along with a decline in consumer confidence will stop rates from increasing in the short term. As well, The Bank of Canada recently announced downward revisions to economic growth and inflation. All of this means that bond yields have remained fairly flat and are expected to stay that way; therefore; fixed mortgage rates will also remain level.

Our experts believe that the cooling off of consumer spending and the economy in general, coupled with uncertainty over the extent and outcome of financial stimulus by the Fed in the US, will cause The Bank of Canada to hold off on interest rate increases for a while now. Top economists are not expecting a change to the key overnight lending rate until at least the first quarter of 2011.

This Month's Panelists

Dan Eisner - President, True North Mortgage

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I expect to see fixed rates increase by 0.1% to 0.2% over the next 45 days. Bonds yield are on the rise and the big five banks have finished their fiscal year ends and are done trying meet their budgets and fighting for business. (for now)

Prime isn't going anywhere and the banks will remain comfortable offering variable rates between P-0.65% to P-0.8%.

George Hugh - President, Taurus Mortgage Capital

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Economic slowing continues to dominate the headlines of many large global centers around the world. The impact on the Canadian residential mortgage market is twofold. It will result in the slowing of housing activity but this will be offset by low mortgage rates. Rates will continue to hold for the short term, further discounts to already low rates are highly unlikely.

A low rate environment for the foreseeable future will continue to push home buyers to VRMs.

Gregory Klump - Chief Economist, CREA

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Bond yields have dropped in tandem with a weakening outlook for economic growth and inflation. The five-year mortgage rates is closely linked to the five-year benchmark bond yield, so the former has dropped to within short reach of lows seen in early 2010. The Bank of Canada's recent downward revisions to economic growth and inflation outlooks mean that bond yields are going nowhere fast, so neither are fixed mortgage interest rates.

The Bank of Canada downgraded economic growth and inflation outlooks in its October policy interest rate announcement and Monetary Policy Report. As a result, the Bank is widely expected to keep its trend-setting overnight lending rate on hold until at least the first quarter of 2011. Variable mortgage rates are tied to the Bank's overnight rate, so they too are on hold until then.

Dr. Ian Lee - Program Director, Carleton University

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We see almost no movement in the 5 year GoC bond rate in the most recent period. Moreover, demand for mortgages is down significantly, along with a decline in consumer confidence. There is very little to suggest any change in fixed rates.

It is extremely unlikely that the Bank of Canada will increase its prime rate before mid 2011. Moreover, the increased uncertainty due to currency squabbles within the G20 and uncertainty over the extent and outcome of quantitative easing by the Fed in the US, should cause variable rates to remain unchanged in the short run.

Larry Macdonald - Economist, Canadian Business

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Fixed mortgage rates should not change much in the near term. They are linked to rates in the bond market, which in turn are linked to deflation/inflation pressures in the economy. At the moment, the latter forces appear to be stalemated, with endogenous deflationary tendencies offset by monetary and fiscal stimulus. As the output gap in the economy is closed, concerns over inflation and bonds yields should begin to edge upward -- but Bank of Canada economists don't expect the output gap to be closed until well into 2012.

Variable mortgage rates should not change much in the near term. Variable rates are linked to rates set by the Bank of Canada and they do not have to be changed at this time because consumer spending and the economy have recently come off the boil.