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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 2014 Overall Summary

Fixed rates may edge slightly higher during the first month of 2014, as bond yields rise from market response to the beginning of the U.S. Fed taper. Variable rates, however, will remain unchanged as little progress has been made in Canada's economic climate.

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Fixed mortgage rates are expected to creep moderately higher this month, as bond yields are pushed up by markets reacting to the first installment of the U.S. taper. A seasonally slow winter market suggests lenders may wait until the more active spring season to discount their fixed rate offerings.

Canada's inflation rate remains below expectation, and other growth factors such as exports and business investment fail to improve enough to mend the gap. Until these factors rebound, and until there is sustained economic improvement in the U.S., the Bank of Canada is not anticipated to increase the Overnight Lending Rate.

This Month's Panelists

Ron Butler - Mortgage Broker at Verico Butler Mortgage

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Five-to-10-year bond yields continue to creep up and with the announcement of QE tapering in the U.S., it should mean there is very little chance for fixed mortgage rates five years and over to go down anytime soon. They will likely remain steady or experience a slight shift upward for fixed rates in next 30 days.

Inflation just keeps on falling, creating a strong case for variable rate mortgages. If there is little chance of a Prime Rate increase for 12 or 18 months, variable looks better than fixed at the moment.

Dan Eisner - President, True North Mortgage

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Bond yields have been steadily rising in the last few days, and as a result, I expect mortgage rates to rise by 0.1 to 0.2 per cent in the coming days and weeks.

We will have to see a sustained recovery in the U.S. economic situation before we start seeing the Banks change their variable rates. As a result, we don't foresee any changes to the variable rates in the next while.

Dr. Ian Lee - Program Director, Carleton University

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The movements of the five-year bond rate are so imperceptible, reflecting no real change in the underlying economic conditions, coupled with lower home purchase demands in January and February; what person goes house hunting in -30 C with intermittent power and awful road conditions? This suggests the fixed rate will remain unchanged until the spring, barring any surprise announcements from the Finance Minister. Moreover, Flaherty's most recent musings on interest rates suggest he is punting the issue to the Governor Poloz. It seems Flaherty is saying in effect, "I have done all the heavy lifting for the past three years to slow down the realty sector. Now it is your turn to step up to the plate and start to raise interest rates to further reduce demand for housing."

From Governor Poloz's speech on December 12 in Montreal, titled Monetary Policy as Risk Management: "We are prepared to remove monetary stimulus when it's no longer needed to offset the forces that currently are pulling inflation below target. But, right now, it looks to us like it will take around two years to get inflation back up to two per cent."

(As well), Statistics Canada's most recent comments concerning Canadian inflation: "The Consumer Price Index (CPI) rose 0.9 per cent in the 12 months to November, following a 0.7 per cent increase in October. November marked the 7th time in the last 13 months in which the CPI increased less than 1.0 per cent on a year-over-year basis".

When these two statements are read together, it seems very clear that no interest rate increases are planned any time soon.

Kelvin Mangaroo - President of RateSupermarket.ca

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Markets reacted to the first installment of the U.S. QE tapering, which pushed bond yields higher in the U.S. and Canada. While some lenders continue to offer aggressive fixed mortgage rates, current conditions leave little room to lower fixed rates in the short term.

It is unlikely that the Bank of Canada will increase the central rate this month. Inflation remains stubbornly below two per cent, and other economic growth factors, such as exports and business investment, have failed to pick up the slack. While recent U.S. tapering measures may put some external pressure on the Bank Rate and lead to speculation of an American rate rise, such movement isn't expected in the short term.