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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?

June 2014 Overall Summary

There's nothing lukewarm about lenders' efforts to stay competitive in this spring's mortgage market. Rate discounting battles have risen with the mercury, providing buyers with a slew of affordable options. Lenders big and small have cut their fixed mortgage rates to 2.99 per cent and below, while variable mortgage borrowers will continue to enjoy low central and Prime rates for some time to come.

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The fixed-mortgage-rate battle wages on, as brokers and big banks alike wade in with discounted offers. Bond yields, which have trended lower during the spring months, show no sign of reversal leading RateSupermarket.ca's panelists to anticipate low rates to linger in the coming weeks.

Canada's long-lagging inflation rate made news this month, reported to have finally hit the 2 per cent benchmark decreed by the Bank of Canada. However such progress, while removing the possibility of a central rate cut, is not yet enough to warrant an increase to Canada's cost of borrowing. As a result, variable mortgage rates are in for no change in the coming months.

This Month's Panelists

Ron Butler - Mortgage Broker at Verico Butler Mortgage

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It is interesting to read more and more commentary about the future low interest rate environment some economists think we may be moving into. Well-known real estate bear David Madani said, "There is a creeping sense now that the new normal in rates is much lower." RBC has suggested bond yields could end 50 basis points below its "official" 2014 forecast. Taking this into account, I believe we may see a slight downward movement in five-year fixed rates in June.

There may have been slight improvements to Canada's inflation rate this spring, but it's not enough to warrant a rate increase from the Bank of Canada. I anticipate no change to the Prime rate for some time.

Will Dunning - Chief Economist, Mortgage Professionals Canada

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Bond yields have drifted downwards during the past month, taking mortgage rates with them. This has occurred because some economic indicators have weakened recently, in Canada and the U.S. But, there are very strong fundamental conditions that should lead to continuing growth in the U.S. This includes continued rapid growth of house prices (now about 10 per cent per year). This is raising confidence and will encourage job creation. That said, at present, about 59 per cent of adults in the U.S. have jobs, which is far below the 63 per cent rate seen before the recession. Even with an optimistic view of the economic outlook, it will be a long time before the U.S. economy is strong enough to justify a sustained rise in interest rates.

The inflation rate has increased in Canada, reaching 2.0 per cent as of April, versus less than 1 per cent just six months ago. But, this is unlikely to alter the expectations of the Bank of Canada about future inflation rates. The recent bump in the inflation rate is due to the weakening of our dollar, which raises the costs for most of the goods we import from the rest of the world. The Bank of Canada is likely to view this as a temporary event that does not justify any change in the base interest rates that it controls.

Dan Eisner - President, True North Mortgage

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Bond yields have been very stable in the last few days. As a result, I expect mortgage rates to remain below the 3 per cent mark for the next while.

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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Canadian home buyers are currently enjoying a competitively priced mortgage market, as lenders duke it out for spring season market share. It is worth noting the discounting trend is growing among the Big 5; both Scotiabank and TD have recently introduced sub-2.99 per cent pricing for their four-and-five-year fixed offerings. As this low-rate environment has been supported by consistently low bond yields, I don't anticipate a reversal of this discounting trend in the short term.

The Canadian rate of inflation may have finally reached its 2 per cent benchmark in April, but it won't be enough to prompt the Bank of Canada to hike their Overnight Lending Rate. And, while Investors Group made waves last month with their 1.99 per cent three-year variable rate, such pricing is marketing driven, rather than a reflection of current variable borrowing conditions.

Dr. Ian Lee - Program Director, Carleton University

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The three-to five-year Canada bond yields are moving around within a very narrow range. There is no evidence this is going to change in the next 30 days. The recent U.S. and Canadian GDP growth rate numbers were pathetic (U.S.) to merely seriously anemic (Canada).

There can be no doubt the Bank of Canada will leave the central bank rate unchanged today. Indeed, the Bank may hint or wink or allude to the possibility of a future rate cut as the Governor continues to try to manage expectations surrounding the loonie. He understands deeply that a depreciated loonie helps exports recover while even a belief in an increase in the central bank rate will send the loonie soaring. So, while the bank is "neutral", it will be "neutrally slightly pessimistic" – "wink-wink-nudge-nudge – know what I mean".