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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?

January 2012 Overall Summary

Canadian consumers could see lower fixed mortgage rates this month as competition heats up and lenders look to build their mortgage pipeline for the year, says RateSupermarket.ca's Mortgage Rate Outlook Panel for January 2012. Variable mortgage rates, on the other hand, are expected to remain level.

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Given the forecast for slow growth in 2012 and the ongoing European sovereign debt crisis, Canadian bond yields are expected to stay where they are; which is a strong indication that fixed mortgage rates should remain unchanged in the short term.

However, our panel of mortgage experts is not ruling out a slight reduction in fixed mortgage rates as lenders get a jump start on the year and build their pipeline for 2012.

The next Bank of Canada interest rate announcement will take place on January 17th, 2012. Our panel of mortgage experts is not expecting any change in the key overnight lending rate for at least the next 6 months due to ongoing turmoil in the global economy. It is also unlikely that lenders will increase or decrease their discounts to prime rates in the short term. As a result, Canadian consumers can expect variable mortgage rates to remain where they are.

This Month's Panelists

Mark Kocaurek - Senior Vice President, ING DIRECT

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The outlook for the Canadian economy for 2012 looks to be growth, albeit at a slower pace than 2011. This and the ongoing European sovereign debt crisis and other troubles outside of Canada will keep longer term Canadian yields anchored near where they stand today. The first few months of the year are typically slower for the mortgage market and I expect lenders to lower fixed rates slightly over the short term in order to win more business.

The Bank of Canada expect the Canadian economy to grow at a modest pace through 2012 and remains worried about the potential negative impact to Canada should the global economy suffer a setback as a result of a worsening of the crisis in Europe. This will keep the Bank of Canada overnight rate unchanged in the short term and as a result variable rate mortgages will also remain unchanged.

Dr. Ian Lee - Program Director, Carleton University

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The bad news from Europe that does not let up (the gift that keeps on giving for analysts), the downgraded forecast for Canada by the major banks, Governor Carney's gloomy outlook, the uncertainty in the US over the 2012 presidential election - it seems reasonable to assume that all bad news has been absorbed and that bond yields cannot go lower, as they have declined to record low levels.

In the current downgraded environment, the Bank of Canada is not about to increase its rate. Although the outlook is worse, inflation is bumping along near the upper band and employment has not collapsed. This suggests that the Bank will not decrease rates either.

Dan Eisner - President, True North Mortgage

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We should see a slight reduction in fixed rates as lenders become competitive in order to build their customer pipeline for 2012.

Little is going to convince lenders to be competitive on variable rates given the ongoing turmoil in Europe.

Elisseos Iriotakis - President, Safebridge Financial

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Unless something material is announced with the European Debt crisis, I don't see fixed rates moving in the next 45 days. However, as we approach the spring market, I wouldn't be surprised to see lenders become more competitive and lower their profit margin from the 1.75% to 2% range, above the bond rate, to the 1.50% to 1.75% range.

Nothing too exciting to report on the short end of the yield curve. No change to prime for an additional 6 months at best.

George Hugh - President, Taurus Mortgage Capital

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It is quite typical to see lower mortgage rates as we head into the so called "spring market". These lower rates allow the banks to kick start mortgage production just in case the housing market decides to slow down? With all the global concerns and the fact that mortgage rates are already at all time lows, don't expect drastic rate cuts, just expect that these rate will remain low for the foreseeable future. 5 Fixed rates will remain unchanged.

Unfortunately, the days of large discounts to Prime are a thing of the past. Expect VRM pricing to stay in close proximity to Prime (3.00%).

Wayne Spinney - Mortgage Agent, Centum Mortgage Professionals

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The benchmark 5 year Government of Canada bond yields have been hovering in the 1.30% range for the past month, and with the muted outlook for the Canadian economy, they are not expected to change drastically in the short term.

However, the mortgage market is typically slow out of the gate in Q1 so I think mortgage lenders are itching to get a jump start to the year and compete for fixed mortgage rate business, so I think they could drop slightly in the next month.

The Bank of Canada is not expected to change the target for the overnight rate for the first half of the year. Also, I don't think that the discounts to Prime that have vanished over the past months will re-appear in the short term, so you can expect variable mortgage rates to remain unchanged for January 2012.