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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?

February 2011 Overall Summary

It was in 2008 when the mortgage pendulum started swinging to the left, heading for record low mortgage rates. The ball swung and came to a stand still, with many Canadians enjoying big loans at cheap rates over the past few years. Now, economists and home owners are just waiting for the wind to change, sending the ball swinging in the other direction.

Rate increases are on the horizon, but our panel of experts believe the mortgage pendulum will remain motionless for a little while longer.

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The recent rise in bond yields would normally signal a rise in fixed mortgage rates. However, our panel members believe lenders are likely to hold of on increasing fixed mortgage rates given the reduced demand for mortgage money and a desire to capture a larger share of the spring market a bit earlier.

Last month the Finance Minister addressed concerns about increasing consumer debt levels by changing some of the mortgage rules in place for government backed loans. This move took some pressure off of the Bank of Canada to announce an interest rate increase. Also, given a recent dip in core inflation, the sluggish US economy and Canada's slightly lower GDP forecast for 2011, the key overnight lending rate is expected to remain level well into the spring, meaning that short-term variable mortgage rates will also stay flat.

This Month's Panelists

George Hugh - President, Taurus Mortgage Capital

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Though we are still a few months away from the official start of the spring, when it comes to mortgage rates, spring pricing for lenders can be taken to mean resisting the temptation to raise rates. As yields creep up due to inflationary concerns across the globe, lenders are biting their tongues resisting the urge to raise rates. Great time to buy and secure a mortgage. Expect rates to remain unchanged.

The Bank of Canada will likely stay put in terms of moving the overnight rate upwards. With that in mind, it is highly unlikely that lenders will increase the discount to prime currently being offered on VRM mortgages. Though VRM rates remain attractive, consumers are getting a little nervous so are thinking a little harder each and every day on whether to go fixed!

Dr. Ian Lee - Program Director, Carleton University

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Again we see little movement in the 5 year GoC bond rate. Moreover, housing sales are flat or down slightly, reducing demand for mortgage money.

While energy and commodities inflation is up, core inflation per Krugman is trending down or modestly up in Canada per Stats Can. The economy in the US is still soft and the problems in Egypt are making markets nervous.

Elisseos Iriotakis - President, Safebridge Financial

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Although bond rates have been creeping up over the last week or so, I don't see them rising too much more especially since the U.S. job report indicated that there was an increase in employment by only 36,000 meanwhile they were expecting 145,000 new jobs to be created. In addition, the fact that 500,000 more American's will not be receiving unemployment insurance does not help the cause. The quantitative easing is not really working to create new jobs but instead inflating the stock market. This to me means that we are in danger category and will likely see a sell off sooner than later and a flight to safety. i.e. money will flow back into bonds in which case interest rates yields will drop, which means mortgage rates will likely follow suit.

The U.S. economy isn't doing that well and indications are that they will hold off on raising rates into 2012. This means, that the Bank of Canada can't afford to rise the overnight lending rate anytime soon. In addition, Canada's GDP forecast was revised down a tad for 2011 which also points to variable rates staying pat into the summer.

Dan Eisner - President, True North Mortgage

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With nothing to rock the bond market, mortgage rates will move sideways for the next little while.

Variable rates aren't moving until we see a sustained improvement in the US economy.