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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?

May 2012 Overall Summary

Once again increased uncertainly in Europe and the wider global economy will cause Canada to sit back and wait before making any major changes to interest rates that could derail our economic growth. While this waiting game plays out, our panel of mortgage experts expect both fixed and variable mortgage rates to remain unchanged in the short term.

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Canadian bond yields have been stable over the past few weeks. Demand for mortgages is moderating in many parts of the country, and there is decreased need for competitive discounting from big lenders to maintain mortgage market share. All these factors point to one conclusion - little change is on the horizon for fixed mortgage rates. Our panel of experts expect fixed rates to remain level for the next 30-45 days.

The recent French and Greek elections raise concern for the future stability of the Eurozone. Will Greece exit the European Union? If so, how many other debt ridden countries will follow? With so many questions unanswered, our Mortgage Rate Outlook Panel members think the Bank of Canada is unlikely to risk rocking the boat by increasing interest rates any time soon. This coupled with the fact that discounts to the Prime rate are not expected to budge given the lack of interest in variable rate terms at the moment, means that variable mortgage rates will stay where they are in the short term.

This Month's Panelists

Mark Kocaurek - Senior Vice President, ING DIRECT

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For the reasons noted in my variable mortgage rate outlook, term yields have remained within a tight range and as a result there hasn't been a market event to prompt a change in fixed term mortgage rates. From a competitive perspective the market has remained robust and so the need for price discounting hasn't been as necessary to maintain market share for the bigger lenders. I expect fixed term mortgage rates to remain unchanged.

A resurgence in fears related to another wave of financial crisis in Europe, this time Spain being the culprit, has tempered market expectations regarding the future health of the global economy. In Canada first quarter GDP figures were surprisingly well below market expectations. Combined these issues will keep the Bank of Canada on hold for the short term and as a result variable mortgage rates will remain unchanged.

Dr. Ian Lee - Program Director, Carleton University

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Historically, fixed rates have never ever been as low as what we've seen over the past few months. This suggests they cannot go lower while demand for mortgages appears to be moderating in many parts of the country, suggesting they will not go higher either for the next 30-45 days. Moreover, the 5 year government of Canada bond rate appears to be stabilizing.

The remarkable uncertainty caused by the French and Greek elections and the weak job numbers from the US and a sense that the US economy has stalled, ensures that Carney will not raise rates, until the economic landscape clarifies. With the continued deterioration of both the Greek economy and politics and the attendant increasing risk of a Greek exit from the eurozone and the massive uncertainty that will cause due to the increased risk of further exits, makes an increase in rates extremely unlikely.

Dan Eisner - President, True North Mortgage

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Bond yields have been trading in a tight band so we will not see mortgage rates move strongly in either direction.

We will see little movement on the discount until more intuitional mortgage buyers become interested in supporting variable rate terms.

Wayne Spinney - Mortgage Agent, Centum Mortgage Professionals

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Over the last 30 days the Government of Canada 5 year Benchmark Bond Yield has been moving between the 1.50 and 1.69 range and the 10 year Benchmark Bond Yield between 1.98 and 2.19. Currently, they are both dancing around the lower band of their respective scales and not making any trending upward movements to suggest that yields are increasing. Since bond yields and fixed mortgage rates are positively correlated, this would suggest that mortgage rates are not on the rise in the near future.

The Bank of Canada is not meeting until June 5th to discuss a possible change to their overnight lending rate so for the duration of the month of May I do not anticipate that there will be any changes made to variable mortgage rates.