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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 2013 Overall Summary

No change for fixed or variable mortgage rates is expected for January, due to continued global economic unease combined with stimulus provided by the Canadian government. While Government of Canada bond yields historically increase in the winter months, low mortgage volume prompts lenders to keep fixed rates at their historical lows. The Bank of Canada is also not expected to make any changes to their Overnight Interest Rate, keeping variable rates at their current levels.

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While Government of Canada bond yields have seen a recent increase, and are anticipated to continue to rise over the coming month, fixed mortgage rates are not expected to follow suit, as global economic factors will keep investor interest in Canadian bonds consistent. Low mortgage volume and a slowing housing market will prompt lenders to keep mortgage rates at competitive levels to capture market share.

The Bank of Canada is not expected to increase the Overnight Lending Rate in the upcoming rate announcement on January 23, nor is an increase anticipated over the next six months. As a result, variable mortgage rates will not change in the foreseeable future.

This Month's Panelists

Dan Eisner - President, True North Mortgage

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Bond yields have been steadily rising since the announcement in the U.S. of an agreement to avoid the "Fiscal Cliff".  As a result I expect mortgage rates to rise by 0.1 to 0.2 per  cent in the next couple of weeks.

Banks and Canadians in general do not seem interested in variable rate options with 5 year fixed rates so low.  As a result, we don't foresee any changes to the variable rates in the next while

Mark Kocaurek - Senior Vice President, ING DIRECT

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Term bond yields have spiked higher in recent days putting pressure on lender's mortgage margins. Normally we would expect mortgage rates to move higher in response. However, I believe fixed mortgage rates will remain more or less unchanged in the short term because I believe that bond yields will grind lower as the market comes to terms with the continuing risk to global prosperity posed by crisis events such as the coming fight in the U.S. over the debt ceiling and also because mortgage volumes are low and lenders will likely remain competitively priced to ensure market share capture.

Although recent Canadian economic data has perked up somewhat such as employment, the mid-term outlook for the Canadian economy remains biased towards tepid to modest growth. As a result the Bank of Canada will leave its overnight rate unchanged for the foreseeable future and so variable rate mortgage rates will remain unchanged.

Mary Zenar - Managing Director of Zenar Financial

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Five-year Government of Canada benchmark bond yields have yet to see major movement, and are not trending one way or another. While, historically speaking, bond yields tend to increase slightly in January and February, suggesting an upward movement in mortgage prices, these marginal changes are not likely to have an impact on mortgage rates given the health of the overall economy.

The Bank of Canada is not expected to change the overnight lending rate in their announcement on January 23, and while the Canadian economy appears to be making progress, the overall global economy is taking a cautious approach to growth, prohibiting an interest rate increase on the home front.

Dr. Ian Lee - Program Director, Carleton University

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While the employment numbers continue to surprise, current and forecasted GDP growth rates are not robust – in the 1.7 per cent to 2 per cent range – and in combination with the ongoing slowdown in real estate sales, ensure there will be no change in interest rates.  We must remember that Stats Can household indebtedness continues to climb to stratospheric levels, ensuring no pull back on the new mortgage rules.

The Bank of Canada rate remains at one per cent and I see no reason for that to move in the next six months.  We need to see increases in growth and inflation – in both Canada and the U.S. – for a forecast increase in the central bank rate to be credible. Once the U.S. is past the debt ceiling debate and a possible grand bargain, we will likely see stronger growth in the second half of 2013.  Only then can we contemplate a rate increase.