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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 2012 Overall Summary

If bond yields have anything to say about it... and they usually do, we're heading for a moderate increase to fixed mortgage rates in March. On the other hand, our panel of mortgage experts expect variable mortgage rates to remain constant during the month.

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Since the beginning of February, we`ve seen bond yield creep up and few lenders have adjusted their rates accordingly. This month our panel of mortgage experts foresee those increases being passed on in the form of moderately higher fixed mortgage rates.

But not to worry, it`s likely that any significant rate increases will be dampened by the prospect of a sombre upcoming budget announcement with cuts expected to reach $4-8 billion annually including public servant layoffs. The announcement will likely dampen demand for mortgage funding and further cool down the housing market.

The Bank of Canada meets on Thursday of this week (March 8th) for their next interest rate announcement. Similar to the last 11 rate announcements, experts are not anticipating any change to the key overnight lending rate, and hence variable mortgage rates should remain unchanged.

The Fed has promised to keep their interest rates constant until 2013, (no surprise given that it's a Presidential election year as well). Moving ahead of the U.S. and increasing our interest rates in Canada will increase the Loonie, which in turn will slow exports and could send Canada into a recession. A risk the Bank of Canada is not likely to take.

This Month's Panelists

Mark Kocaurek - Senior Vice President, ING DIRECT

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Bond yields have remained in a very tight band over the last several weeks and I expect that they will remain close to current levels as a result, bond yields and funding costs are unlikely to prompt a change to fixed mortgage rates. Additionally, I believe that lenders are less likely to become more aggressive with their pricing given the continued political and media focus on housing valuations and consumer debt levels.

I believe that the Bank of Canada will leave its overnight rate unchanged for the foreseeable future and as a result variable rate mortgage rates will not change.

Dr. Ian Lee - Program Director, Carleton University

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We now know the Government of Canada budget date of March 29 (I am in the Budget Lockup that day as a guest of Global TV). Moreover, we know that the deficit is declining more rapidly than expected - reducing the demand for Govt borrowings. We know this is going to be an austerity budget with cuts of between $4 billion and $ 8 billion annually including public servant layoffs. While this will not tip the economy into recession contra a Governement of Canada union - it will dampen demand and further cool down the housing market and demand for mortgage funds.

We already know that the Fed Reserve has promised to keep rates low until 2013 or longer. This is a Presidential election year and there is a "norm" that Fed Reserve Chairs do not raise rates during the election period. Moreover, US GDP and employment numbers are still weak as are Canadian GDP numbers. Thus, it is extremely unlikely that Gov Carney will change the central bank rate on March 8.

Dan Eisner - President, True North Mortgage

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Bonds yields have risen recently and thus we will likely see some modest increases to the fixed term rates.

We won't see much movement on the variable front for many months to come.

Elisseos Iriotakis - President, Safebridge Financial

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Bond markets have been steadily rising over the last two weeks and may continue to rise over the next month. It will depend on U.S. job numbers as they showed signs of improvement in the last 30 days. Employment numbers are a leading indicator to a better economy and may be enough to assume the floor has been found for U.S. real estate and the U.S. economy in general. A positive and growing U.S. economy only means good things for Canada ... except that fixed rates will rise.

There is no need for the Bank of Canada to raise their overnight lending rate as they don't want to disturb the moderate growth Canada is experiencing. Moving ahead of the U.S. will increase the Canadian Dollar, which in turn will slow exports and could send Canada into a recession. Don't expect a rate increase until late 2013.

Wayne Spinney - Mortgage Agent, Centum Mortgage Professionals

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There are multiple factors that contribute to the idea that fixed rates will be increasing; namely, the Greek bailout, growing optimism on the global economic outlook, improving economic indicators in the United States and the upward trending bond yield in Canada during the month of February. The Government of Canada benchmark 5 year bond yield began February at 1.26 per cent and by month end jumped up to 1.44 per cent, an increase of over 14 per cent! Since fixed mortgage rates and bond yields tend to move in the same direction, I anticipate that fixed mortgage rates will moderately increase, mimicking the recent trend in bond yields.

The Bank of Canada will be meeting later this week (Thursday, March 8th, 2012) to discuss a possible increase to their overnight lending rate. I do not anticipate that there should be any changes made to the overnight lending rate at this time as Canada is still only recovering at a modest pace and Governor Carney is unlikely to do anything to slow it. This means that variable rates will also remain unchanged for the time being.