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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?

March 2011 Overall Summary

The short term outlook for fixed mortgage rates is unclear but the resulting consensus is unchanged. Homeowners can also expect low variable mortgage rates to continue in the short term, while the long term outlook is a slow and steady increase set to begin around the middle of 2011.

Fixed RatesUnchanged Variable RatesUnchanged

We've seen fixed rates edge up over the past few weeks and although the experts expect the upward trend to continue during 2011, it's unclear where fixed mortgage rates are headed in the short term.

Unrest in the Middle East is expected to put a short term lid on bond yields and possibly even cause yields to drop, which could result in slightly lower fixed mortgage rates over the next few weeks. However, given the strong Canadian dollar and moderate economic growth, the banks are more likely to stay pat then lower rates again.

The recent Bank of Canada announcement on March 1st confirmed what many of our experts were expecting - no change to interest rates in the short term.

The recent increase in oil prices as well as escalating food prices, means global inflationary pressures are rising. However, these elevated prices are expected to slow, but not derail global growth. All things the same, the Bank of Canada will start increasing interest rates as we head into the summer months, meaning variable mortgage rate will also rise.

This Month's Panelists

George Hugh - President, Taurus Mortgage Capital

Fixed RatesUp Variable RatesUnchanged

The economic outlook seems to change from day to day, but the one thing that seems certain is that interest rates are biased to the upside. Though this may be true, a strong CDN dollar, high oil prices etc. will slow the speed at which interest rates will rise. I expect rates to increase slightly from currently levels.

Profitability on variable rate mortgages is beginning to disappear. Expect VRM pricing to stay where it is especially in the near term.

Dr. Ian Lee - Program Director, Carleton University

Fixed RatesUnchanged Variable RatesUnchanged

There is upward movement in the 5 year GoC bond rate reflecting the continuing strength in the economy.

While energy and commodities inflation is up, core inflation in Canada per Gov Carney two days ago is 1.4%. The Bank of Canada did not increase its key rate and does not meet again until April 2011, ensuring no rate increase before then.

Elisseos Iriotakis - President, Safebridge Financial

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Mortgage lenders increased their fixed rates last month in response to higher Canadian Government bond yields, although they tried to hold on and not raise mortgage rates longer than expected due to increased competition in the market.

The same bond yields have since dropped in the past few weeks, and coupled with uncertainty in the Middle East, they can be expected to stay where they are or even head lower. As a result, fixed mortgage rates will follow the same trend and stay relatively stable in the short term.

The Bank of Canada announced earlier in the week that they will be keeping interest rates at their current levels, and inflation is in line with their expectations. Most of the major bank's economists believe that the Central Bank will hold off increasing rates until at least May, or most likely July. As a result, variable rates should remain at their current levels this month.

Dan Eisner - President, True North Mortgage

Fixed RatesDown Variable RatesUnchanged

With the turmoil in the Middle East we will see a flight to safety. That will result in falling bond yields and increased ability for the banks to lower their 5 year fixed rates. It won't be a major move but should bring 5 year best rates to under 4%.

You don't need to increase prime rate to slow the economy if the price of oil going up is going to do it for you.