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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?

September 2014 Overall Summary

Back-to-school season ushers in a fresh start, but there's to be no new development for Canada's mortgage market this fall. Stable bond yield levels continue to set the stage for fixed mortgage rate discounts, while economic growth factors fail to rock the Bank of Canada's boat; the governing lender has announced no change once again for central rates.

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Despite a strengthening Canadian dollar, government of Canada bond yields, which correlate directly with fixed mortgage rate pricing, have remained competitively low. Lenders have followed suit, and these discount-friendly conditions are to linger throughout early fall.

The Bank of Canada has called for no change to central interest rates in the early September announcement, and has taken a neutral stance with policy nuances; improvements to exports and inflation will fail to make a mark until growth is proven to be sustainable, leading to no change for variable-rate mortgages.

This Month's Panelists

Dan Eisner - President, True North Mortgage

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Bond yields have been very stable the last several weeks despite the recent fluctuations in the Canadian dollar. As a result, we don't expect to see mortgage rates change in either direction. However, despite the current low-rate environment, the regulation changes this year have hurt the ability of some first time home buyers to purchase a home.
The structural changes in the last few years in this industry has led to a transition of power from the consumer in the pre-2008 years to the banks in the post-2008 years to the banking regulators in the current time period. Consumers must play by the ever changing rules set out by the regulators.

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.

Will Dunning - Chief Economist, Mortgage Professionals Canada

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Post-recession conditions pave the way for little change to bond yields, and in turn mortgage interest rates. I anticipate no substantive changes in the near term, though fixed rates may edge a half point higher by the end of next year.

The so-called "Great Recession" began six years ago. In theory it lasted less than a year. But, in reality, it left behind lasting damage. In both Canada and the U.S., more than 63 per cent of adults had jobs before the recession. Now the rates are much lower at 61.4 per cent in Canada and 59.0 per cent in the U.S. These changes may not seem very large but they mean that there are huge numbers of people without jobs. In short, while the rate has started a gradual rise in the U.S., there is a very long way to go before there is any case for substantial rises in mortgage interest rates. No substantive changes are expected this year or next year.

Dr. Ian Lee - Program Director, Carleton University

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The five-year Government of Canada bond rate has been bouncing around between 1.4 and 1.50 per cent. There is no evidence of a breakout in either direction. It certainly appears there is a reasonable balance between the demand for mortgage money in this category and the supply.

We know that during the last year, Governor Poloz has been softly walking back from Carney's strategy of proving forward guidance to markets, representing a gentle break with the past.

However, in a truly remarkable interview with the Globe and Mail on August 24, while at the annual Federal Reserve conference, Poloz stated the Bank of Canada would not automatically increase rates at the same time as the Federal Reserve. Those who have examined a long-term graph of the Federal Reserve and the Bank of Canada rates know there is an astonishing synchronicity between the two central bank rates over long periods of time stretching back decades. If the Fed were to increase rates and the Bank of Canada did not follow, this would place downward pressure on the loonie.

Now in his latest musings and public comments, the Governor stated there is enough slack in the Canadian economy and no need to increase interest rates any time soon.
When we take these decisions and comments together, it is clear Governor Poloz has provided his own unique guidance that strongly suggests no interest rate increase before 2015.

Kelvin Mangaroo - President of RateSupermarket.ca

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Consistently low bond yields have given lenders the room to competitively price their fixed mortgage rates; the best five-year fixed mortgage rates remain below the 3 per cent threshold. Shorter-term mortgages are also aggressively priced, with two-year fixed options below the 2.5 per cent mark. I don't anticipate conditions will change enough to warrant any fixed-rate price fluctuations in the short term.

The Bank of Canada has again taken a hands-off approach to central interest rates, announcing no change in the early September announcement. This marks the full fourth year of no interest rate change, as Canada continues to recover from recession conditions. While exports have experienced surprising improvement this summer, the BoC states sustained growth is needed before it becomes a defining factor for rates. As well, high household debt levels continue to pose risk to Canada's economic stability. All signs point to the Bank sticking to their 2015 timeline in regards to the variable cost of borrowing.