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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?

April 2011 Overall Summary

Anyone who believed we would see an interest rate increase before the spring home buying season changed course following the announcement that Canadians would be going to the polls in May. Couple this with the recent jump in fixed mortgage rates and our expert panel members believe rates across the board will remain level during the next 30-45 days.

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Steady increases in bond yields at the end of March and beginning of April have resulted in higher fixed mortgage rates this month. Now that oil prices are dipping and the loonie appears to have slowed or peaked, our experts think fixed rates will stay where they are throughout the rest of the month.

If anything can persuade the Bank of Canada to hold off on increasing interest rates, it's a federal election. With inflation under control this means that variable mortgage rates will remain unchanged in the short term. Economists expect the rate holding pattern to remain in effect until July 2011.

This Month's Panelists

George Hugh - President, Taurus Mortgage Capital

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The pressure for fixed rates to move up continues but the reality is that they will do so gradually. With the latest moves made by most of the lenders, don't expect another such increase in the short term because of the negative impact it would have on exports, Canadian dollar etc. Fixed rates will remain unchanged over the short term with a bias to slightly dropping.

The differential between the fixed and variable rates remain larger (4.00% vs. 2.25%) which consumers love. Don't expect any changes till after the lukewarm spring market.

Dr. Ian Lee - Program Director, Carleton University

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The 5 year BoC bond rate is stable. The Middle East appears to be stabilizing with Libya seeking a cease fire and no further eruptions in e.g. Syria, and is reflected in oil prices falling slightly. The loonie's ascent appears to have slowed or peaked.

Approximately 80% of economists in Reuters poll expect BoC to hold off on a rate increase until July 2011. Moreover, core inflation in Canada is still low. Thus, variable rates should remain unchanged.

Elisseos Iriotakis - President, Safebridge Financial

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Fixed 4 and 5 year mortgage rates jumped by as much as 0.35% this week, so I don't see another big jump for the next 30 - 45 days. We may see another .10% increase but this will depend on whether the Bank of Canada surprises the markets and increases their overnight lending rate at the April 12th meeting.

Even though China and the EU increased their rates at their respective policy setting meetings, I believe that Canada will hold off until their May 31st meeting before increasing the overnight borrowing rate. If Canada pushes ahead of the U.S. in increasing their rates, the Canadian dollar will get even stronger and when you couple this with weak demand from the U.S. consumer for Canadian products, the recovery may be derailed; which is something Prime Minister Harper doesn't want to see in a year of an election.

Dan Eisner - President, True North Mortgage

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The steady increase in bond yields in the latter half of March and continuing into April has caused about half of the lenders in Canada to increase their fixed rates, by an average of 35 basis points. You can expect that the lenders who have yet to move their fixed rates will do so by the end of this week. This means that by the weekend Canadians will be hard pressed to get a 5 year fixed rate mortgage below 4%. Once all of the lenders have adjusted their fixed rates, to account for the higher cost of funds, you can expect fix rates to stabilize for the rest of the month.

The Bank of Canada's next scheduled PRIME rate announcement is April 12th. Based on the language contained in their last announcement on March 1st, the distraction caused by a federal election and the Canadian dollar trading around $1.04, I expect the that the Bank of Canada Prime rate will remain unchanged at 1%.