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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?

December 2011 Overall Summary

Can fixed mortgage rates get any lower? This month our panel members aren't ruling out a decrease to fixed rates in the short term. At the same time, they feel quite strongly that variable mortgage rates will stay at current levels well into 2012.

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With no quick fix on the horizon for the European debt crisis, the global economic outlook continues to be pessimistic causing downward pressure on longer term bond yields. Couple this with decreased demand for home loans during the busy holiday season, and it is likely that fixed mortgage rates will stay low or even drop further over the next 30-45 days.

Recent GDP numbers were surprisingly strong, inflation is near the target range, and a global economic meltdown could be on our door step. The last thing Governor Mark Carney wants to do is shock consumers during the busy holiday buying season with news of an interest rate increase. As a result, our panel members agree that the Bank of Canada will hold rates steady at their next meeting.

This Month's Panelists

Mark Kocaurek - Senior Vice President, ING DIRECT

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Bond yields have been volatile as of late as global markets wrestle with the implications of the European debt crises and the political impasse in the US over deficit reduction efforts. I believe that the consensus market's view on the medium term outlook for global economic activity has turned more pessimistic and as a result longer term yields are likely stay low if not move lower over the next 60 days or so. This coupled with a historically quiet period in the Canadian mortgage will likely see fixed term mortgage rates move lower over the next month or so.

The Bank of Canada is very likely to hold its overnight rate at its current level for the foreseeable future. There are concerns that a global downturn will impact Canada's economic performance. Recent economic indicators for Canada have been mixed. As a result I believe that variable rate mortgage rates will remain unchanged for the near term.

Dr. Ian Lee - Program Director, Carleton University

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With all the uncertainty caused by the Eurozone crisis and a slowing of demand for mortgages in Canada, and less fluctuation on bond yields this past month, it appears that fixed rates will remain unchanged.

While no rational person suggests the Bank of Canada will increase interest rates next week, it is unlikely that the Bank of Canada will decrease rates (yet) given the surprisingly strong GDP numbers and inflation bumping up near the ceiling of the target range. The central banks are watching the eurozone closely to see if Germany and fellow Euro countries will finally achieve a fiscal compact to impose budget discipline, control and penalties on member countries that violate fiscal and budget commitments. While Germany yet again ruled out Eurobonds and fiscal union, they are now hinting that if a fiscal compact is agreed to, they will allow the ECB to buy up larger quantities of bonds from what some Germans are now calling La Dolce Vita countries.

Dan Eisner - President, True North Mortgage

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Last week was relatively quiet due to the US Thanksgiving holiday but bond yields have jumped by 10-15 basis points early this week as positive new plans have begun to emerge from Europe. Even so, Banks are happy with their margin on fixed rates and will likely not move rates up or down.

Unfortunately the TED spread has continued to rise due to uncertainties related to European Banks. We may see further increases in the variable rate to accommodate the extra risk in the market place.

Stella Cellucci - Mortgage Agent, Centum Mortgage Professionals

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The European debt crisis is still causing havoc in international markets and yesterday (December 1, 2011) there was a huge 3.5% drop in 5 year bond yields. As there is no short term quick fix in Europe, there will be downward pressure on bond yields and we can also expect lower fixed mortgage rates in the short term.

The next Bank of Canada rate announcement is on December 6, 2011 and the consensus amongst economists is that there will be no increase in the Central Bank's key interest rate until well into 2012. Global economic conditions are impacting Canada's growth prospects and Governor Mark Carney will be very hesitant to make a move that could slow down our recovery.

Despite the fact that Scotiabank's variable mortgage rates increased last week by 0.10%, and other lender's have not followed suit, I think we can expect ARM's to remain unchanged in the short term.