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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 2017 Overall Summary

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This Month's Panelists

Dan Eisner - President, True North Mortgage

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Bond yields have stabilized so we don't expect to see any further rise in fixed rates. However, as Banks and other lenders adjust pricing to meet new regulations that came into effect on Jan 1st, many borrowers could be paying more for their next mortgage.

Canadian banks are raising their variable rates for new clients in response to the increased costs of meeting the new government regulations that came into effect on Jan 1st.

Will Dunning - Chief Economist, Mortgage Professionals Canada

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During the month after the US Presidential election, bond yields jumped. The yield for 5-Year Canada bonds rose by more than one-half of a point, and the increase was even larger in the US. This has largely been interpreted as a response to the expected impacts of Trump's policies on growth and inflation. I have suspected that it has more to do with uncertainty, since there is no clarity about what policies will actually be followed. During the past month, yields have retreated partway (by about one-tenth of a point). Mortgage interest rates followed bonds higher, but only partially. Therefore, unless bond yields fall further, there is room for mortgage rates to increase a bit. What's more, new government policies are likely to add pressure for rates to rise. Firstly, lenders will have to hold more capital reserves, which will cost them money and they will attempt to recover those costs. Secondly, the new policies will reduce competition in the mortgage market, which will encourage lenders to further increase rates. All of this said, there is potential for interest rates on fixed rate mortgages to rise by one-quarter of a point during the next three months.

Rates for variable rate mortgages are highly influenced by the Bank of Canada's "overnight rate". During the first half of 2016, job growth was sluggish in Canada, at an "annualized rate" of just 0.5%. During the second half of the year, there was an improvement, to a rate of 1.9%. This has reduced the pressure on the Bank of Canada to reduce its benchmark interest rate. We may soon hear more comments that it's time to raise that rate. I think it's still too soon. The federal government's measures to slow the housing market will also negatively affect the broader economy. It will take some time for the actual impacts to become apparent. Thus, the next two meeting dates (January 18 and March 1) are too soon. There might be a reduction on April 13 or, more likely, May 25.

Dr. Ian Lee - Program Director, Carleton University

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