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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 2017 Overall Summary

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Economic predictors like job creation and the employment rate are pointing upwards, and the GTA housing market is showing signs of cooling due to recent measures implemented by the Ontario government. However, average Government of Canada 5-year bond yields have once again slipped this month, leading most experts to predict that there is no reason to raise rates. Across the board, panelists agree that fixed mortgage rates will remain unchanged.

As the Bank of Canada shows signs that they have no plans to change the overnight interest rate anytime soon, the panel is in consensus that variable rates will remain unchanged for a while. The BoC recognizes that Canada's economy is improving, but a rate change could affect stability in our financial institutions and likely will not help the hot housing markets cool.

This Month's Panelists

Will Dunning - Chief Economist, Mortgage Professionals Canada

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Economic indicators are improving in Canada. It looks like jobs are being created at a faster rate than population growth (1.5% per year versus 1.0% per year). This is a very positive sign. Yet, bond markets are saying it is still too soon to be worried about inflation and too soon for interest rates to increase – and I agree with this. In fact, the yield for 5-year Government of Canada bonds has been falling. The average for May was just 0.98% - down from 1.05% in April and 1.18% in March. Also, the percentage of Canadian adults who have jobs currently sits at 61.4%. This is still notably lower than the 63.4% that was seen before the recession of 2008/09. In consequence, there is still no compelling case for higher interest rates. There will always be small week-to-week movements in interest rates, but the balance of probability shows that it will be a long time before we see a significant and sustained rise in interest rates.

Rates for variable rate mortgages are highly influenced by the Bank of Canada's "overnight rate". With that being said, the Bank of Canada is in no hurry to raise its benchmark interest rate (regardless of what happens to U.S. rates), and confirmed this in its recent interest rate announcement on May 24. Comments from the Bank indicate that while there has been some improvement in economic conditions, it is comfortable with its current interest rate. I am no longer saying that we might see a BoC rate reduction later this year, but at the same time I don't expect any increases either for some time.

Dr. Ian Lee - Program Director, Carleton University

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Last month, the Government of Ontario announced a suite of changes designed to cool the housing market, including a "non-resident speculation tax." It also revealed that it would cooperate more with CRA in reporting real estate sales to ensure taxes are paid. Considering the increased housing supply, and CMHC's continued effort to tighten matters in mortgage insurance, the cumulative effect seems to be cooling the market in the GTA. Nonetheless, heightened uncertainty in our economic outlook continues, mainly due to contradictory messages concerning trade from the Trump Administration. As a consequence, average 5-year bond yields are back down to around 0.9% - approximately the same rate it sat at just before the U.S. presidential election in November. But due to the uncertainty, it is unlikely they will decline much further.

On June 8, the Bank of Canada will release its Financial Stability Report. It will provide an opportunity for Governor Poloz to note again that interest rates are a "blunt instrument". While it is well known that inflation targeting is a primary objective for the Bank of Canada, the Bank equally sees financial stability of our institutions as a primary goal as well. Moreover, Governor Poloz has expressed skepticism in using interest rates to cool regional housing problems in the GTA and in Greater Vancouver – especially when inflation is well below the target level. And an increase in rates could introduce additional risk to our financial institutions.

Dan Eisner - President, True North Mortgage

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The Bank of Canada won't be raising prime anytime soon and bond yields remain flat. We don't expect any changes to 5-year mortgage rates.

Variable mortgage products are growing in popularity but we don't expect variable rates to change anytime soon.