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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?

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Is Canada headed for a recession? All eyes look to second quarter economic data for clues - and whether the Bank of Canada will cut rates again for the second time this year. The recent numbers aren't economically encouraging, as both energy and non-energy sectors disappoint, adding increased pressure for the BoC to make a stimulus move. Our panel anticipates another 0.25 per cent cut in the upcoming July announcement, while low bond yields hold fixed rate discounts at status quo.

Fixed Rates - Unchanged Variable Rates - Down

Fixed mortgage rates have been very competitively priced, with some of the lowest offerings in the 2.30 per cent range. This discounting has been supported by a consistent demand for Government of Canada bonds, as investors flock to safe haven options amid Greek and Chinese economic drama. It's not expected that lenders will change their discounting tactics in the short term.

The odds that the Bank of Canada will cut central rates this month are increasingly likely, as economic data fails to reflect any of the anticipated Q2 recovery called for early in the year. RateSupermarket.ca's experts call for a quarter-of-a-percentage cut to the Overnight Lending Rate in the next Bank of Canada rate announcement, with additional downward pressure on Prime rates and the variable cost of borrowing.

This Month's Panelists

Dan Eisner


True North Mortgage

Fixed Rates - Up Variable Rates - Unchanged

Bond yields continue to apply upward pressure on fixed mortgage rates. We have seen some of the smaller lenders recently raise their five-year rates by 0.05 per cent and we could soon see larger lenders follow. If the Bank of Canada does not lower prime rate in mid July, we will surely see an increase to five-year fixed rates.

Most economist believe the Bank of Canada won't be lowering Prime this time out, but it is not a certainty.

Will Dunning

Chief Economist,

Mortgage Professionals Canada

Fixed Rates - Up Variable Rates - Unchanged

Bond yields have plunged once again, in response to the uncertainty surrounding Greece. As of July 6, Canadian bond yields (for five-year maturities) have returned almost to the record lows seen in January. I see this as a temporary interruption of a trend towards very slow rises in bond yields in Canada and (more so) in the United States. The U.S. economy continues to strengthen and is nearing the point at which the costs of borrowing will start to rise, across the full range of maturities. But, because the Canadian economy is relatively weak, the rise in interest rates here will be even more gradual than in the United States. That said, I expect that by year end, five-year rates at or below 3.0 per cent will still be widely available.

The question of the moment is whether the Bank of Canada will reduce its official rate (the "Overnight Lending Rate") at its meeting on July 15. Economic signals are mixed. While the big macro indicators (especially GDP growth) have remained weak, some key micro indicators (especially housing market data, but also including retail spending) are showing strong responses to the very low levels of interest rates. My guess is that the Bank will not make any change in this month's announcement. But, I continue to expect that future data will continue to show weakness (and in particular, housing activity will gradually fade, as the benefits of earlier drops in interest rates are diminished). Thus, it is more likely that there will be another reduction in the Bank's overnight rate at the meeting date of September 9 (by a quarter point). That would bring a corresponding drop in lenders' prime rates and rates for variable rate mortgages.

Dr. Ian Lee

Program Director,

Carleton University

Fixed Rates - Unchanged Variable Rates - Down

From February until the present, the 3-5 year bond yield has been bouncing around 0.5 per cent to 0.8 per cent - a very narrow range of about 30 basis points. The numbers suggest that supply and demand are in relative balance.

The next interest rate announcement is scheduled for July 15. In the last week, based on the slightly negative GDP data for the last 5 months, two banks have suggested that Canada is in recession or will be in recession. Moreover, the most recent non-energy export numbers were well below expectations given the depreciated loonie and ultra-low interest rates. Finally, oil prices appear to be dropping again. The steady drum beat of bad news, poor numbers and pessimistic analyses strongly suggests that the Bank of Canada will announce a decrease in the central bank rate next week – not to stimulate borrowing but to place downward pressure on the loonie due to a belief by some financial analysts that the loonie is still overvalued.

Kelvin Mangaroo

President of RateSupermarket.ca,

Fixed Rates - Unchanged Variable Rates - Down

Government of Canada bond yields remain low as unfolding Greek and Chinese economic drama push investors toward safe haven options. However, while yields remain below the one per cent threshold, their movement has been within a very limited range - about 35 basis points over the past four weeks. With some of the most competitive five-year fixed rates currently priced below 2.4 per cent, lenders aren't likely in a rush to discount rates further at this time.

The symptoms of a Canadian recession are becoming apparent, and it's clear the Bank of Canada will need to take a stimulus approach to interest rates, inflation and GDP. Recent negative trade data has reflected a downturn in Canada's non-energy exports, indicating Q2 will not be the recovery period the BoC initially hoped for. I think it's highly likely that the central bank will implement another quarter of a percentage cut in their next announcement.