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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?

April 2014 Overall Summary

Lenders may have kicked off the home buying season with mortgage discounts, but it's questionable whether this low-rate environment can be sustainable as global economic trends shift slightly out of favour for safe haven bonds, driving yields and rates higher. On the domestic front, there is no change anticipated from Canada's central bank as growth factors continue to underperform.

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The typically competitive spring buying season is just heating up in Canada - and some lenders, such as BMO, have introduced discounted rates to kick off the action. However, the expert panel indicates changing global economic trends will counter the possibility of a competitively low interest rate environment, as investors shift their focus from safe haven bonds, driving yields, and fixed rates, higher in the long term.

Economic growth factors continue to underperform, giving the Bank of Canada no reason to change central interest rates in the April 16th announcement. While a lower loonie may give inflation a small boost, it's not likely this will prompt any change from the bank to the current cost of borrowing.

This Month's Panelists

Ron Butler - Mortgage Broker at Verico Butler Mortgage

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Higher bond yield movement after Janet Yellen's somewhat ambiguous remarks should cause fixed rates to trend up slightly. That being said I am not placing a bet on rising fixed rates because we are fast approaching the key spring real estate market in Canada. Banks compete strongly this time of year for their share of that market and rates are normally discounted to be aggressive.

I don't believe there is any possibility of a central rate increase over the next month, leaving the cost of variable borrowing stable for the time being.

Will Dunning - Chief Economist, Mortgage Professionals Canada

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Economic confidence moves in waves, and this causes short-term movements in bond yields. In turn, mortgage interest rates more-or-less follow those movements. A surge in stock markets, on top of a rise in consumer confidence indexes in the U.S., hints that economic confidence will be a bit stronger in the near term, which would lead to an uptick in bond yields. As a result, I expect that mortgage rates may rise a bit during the coming month (perhaps five to 10 basis points). Looking farther out, I do not expect a substantial, sustained rise anytime soon, because economic conditions depend on events in the housing market, which remains highly sensitive to interest rates.

The recent weakening of our dollar will result in a temporary uptick for the Canadian inflation rate, due to cost rises for imported goods. But, the Bank of Canada is likely to view this as a temporary event that does not justify any change in the base rates that it controls.

Dan Eisner - President, True North Mortgage

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Bond yields have been up in the last few days, and as a result, I expect mortgage rates to increase subtly over the next few days and weeks. The recent sub three per cent fixed rate offerings will be short lived once the summer market kicks in. The recent devaluing of the Canadian dollar greatly reduces the likelihood that the Bank of Canada will reduce the Prime rate.

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.

Kelvin Mangaroo - President of RateSupermarket.ca

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The big banks have ramped up the marketing machines for the key spring home buying season led by BMO's re-introduction of the 2.99 per cent five-year fixed rate special. This has resulted in an extremely aggressive mortgage rate environment with mortgage brokers advertising sub 2.99 per cent 5 year rates and other banks discounting their 4 year fixed rates down to as low as 2.94%. Even with BMO's special ending in mid-April, I believe that rates will continue to be competitive this spring and will remain unchanged in the short term.

Recent comments from the U.S Fed suggest American central rates may move in early 2015 - as Canadian interest rates traditionally lag our U.S. counterparts, there's no reason to believe the Bank of Canada will change their monetary policy in the upcoming announcement on April 16. I expect variable mortgage rates to remain close to their current levels in the short term.

Dr. Ian Lee - Program Director, Carleton University

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The 3-5 year bond yield is bouncing around a very narrow range, while the CPI was 1.1% for the last twelve months. CIBC Benjamin Tal's call for significantly greater housing and mortgage information disclosure, and a new Minister of Finance in an embattled government that wants new "announcables" to change the channel – which could be enabled relatively quickly by regulation - produce a much more clear understanding that could lead to further changes in the mortgage underwriting rules.

Inflation is still below the Bank of Canada upper range and the economy is still underperforming – and will for quite some time to come according to Governor Poloz in his latest fascinating speech. More importantly, the depreciation of the loonie has given the central bank more degrees of freedom, ensuring no rate increase or decrease for the new future.