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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?

February 2013 Overall Summary

Despite increasing Government of Canada bond yields, a slowing housing market prompts lenders to take competitive measures to gain mortgage business, leading to no movement for fixed mortgage rates. Variable mortgage rates are also expected to remain unchanged this month, as the Bank of Canada did not introduce rate changes in the January 23rd announcement.

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While Government of Canada bond yields have increased over the past month, a development that would usually prompt a fixed mortgage rate hike, lenders are keeping rates low in order to remain competitive as Canada's housing market sales continue to decline, and the rate of inflation remains low.

As the Bank of Canada did not increase the Overnight Lending Rate last month, market conditions for variable mortgage rates will remain stagnant, with no possibility of a rate change until the next announcement on March 6. However, as consumer debt levels remain at record highs and global economic uncertainty lingers, an interest rate increase is not expected until late 2013 or 2014.

This Month's Panelists

Mary Zenar - Managing Director of Zenar Financial

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While Government of Canada benchmark bond yields have been steadily (though silently) increasing since December, a fixed mortgage rate hike is not expected for the month of February as lenders look to maintain a competitive edge in the slowing market. As a result, lenders are willing to take a hit from lower rates and reduce profit margins in exchange for market share.

Canada's central bank did not call for any interest rate changes for the Overnight Lending Rate in their January 23rd announcement, and so there will be no possibility of movement until the next announcement on March 6. Inflation rates are currently at a three-year low, and as Canada's economy slows, the housing market cools, and the global outlook remains unstable, variable mortgage rates will not increase any time soon.

Dan Eisner - President, True North Mortgage

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Bond yields have been steadily rising in the last few days;  as a result I expect mortgage rates to rise by .05 to 0.1 per cent in the next couple of weeks.

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

Elisseos Iriotakis - President, Safebridge Financial

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Even though we saw an increase in the November GDP (+0.3 per cent) and bond rates will likely rise, I don't see lenders increasing their fixed mortgage rates per say. The key reason is that we find ourselves heading into the spring real estate market where the largest number of transaction take place, so lenders will be looking to lock up as much market share as possible. Let's not forget BMO's aggressive pricing strategy around this time last year. These competitive forces will keep the fixed rates flat over the next 30 – 45 days.

I do not see any movement for at least 12 months and wouldn't be surprised if we don't see much action until after the 2016 U.S. Presidential election. That's correct - no movement for three-plus years!

Mark Kocaurek - Senior Vice President, ING DIRECT

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The prospect of higher inflation appears to be well in the future, and as a result I believe that term bond yields will remain close to their current levels for the foreseeable future, as will fixed term mortgage rates.

Inflation in Canada continues to be a non-issue and the prospects for higher inflation appear to be much further out in the future. As a result the Bank of Canada will be on hold for the foreseeable future with regard to its overnight rate. Variable rate mortgage rates will remain unchanged.

Dr. Ian Lee - Program Director, Carleton University

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The 4th quarter GDP decline in the U.S. was a big surprise. It yet again revealed that the U.S. - and thus Canada – is not yet out of the woods into a full blown recovery.  The latest Canadian consumer indebtedness numbers continue to defy gravity, defy the mortgage rule changes and defy political threats. While real estate and automobile sales are turning around in the U.S., it is not demonstrating a major impact yet in growth increases or unemployment declines.

The Bank of Canada rate remains at one per cent and with continued weakness in the U.S. and Canada, there will be no central bank rate increase.  Moreover, a new Governor will be announced soon and while that should have no influence on rate setting, I cannot imagine any new Bank of Canada governorstating that one of his very first decisions will be to increase rates for the first time in three or four years.