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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 2015 Overall Summary

The first signs of autumn may have arrived, but that's the only fall Canadians will witness in the near future; RateSupermarket.ca's expert mortgage panel has called for the cost of borrowing to remain unchanged throughout the season.
Lenders will stick to current discounts for fixed-rate mortgages, as government bond yields remain consistently low. And, while a freshly-minted recession puts pressure on the Bank of Canada to provide stimulus, it's expected the central bank will wait for the bigger data picture before cutting rates for the third time this year.

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As Chinese market volatility causes pain for equities around the globe, government of Canada bonds continue to be ranked among the safest of investments. Continued interest has kept yields sub-1 per cent, and firmly within a 30-basis point range. Fixed-rate mortgage borrowers will continue to access rock-bottom rates, as low as 2.39 per cent for a five-year fixed term.

Will they or won't they? Speculation over the Bank of Canada's next move has reached fever pitch. However, the central bank is likely to leave them guessing, as recent promising economic data buys the Bank some time before implementing further monetary policy cuts. Variable mortgage rates are expected to remain unchanged over the coming month.

This Month's Panelists

Dan Eisner - President, True North Mortgage

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Government bond yields continue to trade in a tight range which would suggest no mortgage rate changes to come.

We have seen the Chinese stock markets face some substantial declines in the last few weeks, and weakness in China does negatively affect the Canadian economy. We have already see our dollar fall as a result, but will we see the Bank of Canada respond as well? I don't think we will for two reasons. Firstly, the recent Bank of Canada rate drops were a significant windfall for the big Canadian banks, something the central bank doesn't want to repeat. Secondly, the lowered Canadian dollar will do a better job at stimulating the economy than anther rate drop. Thus, we don't foresee any changes in the coming days to prime rates.

Will Dunning - Chief Economist, Mortgage Professionals Canada

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Until two weeks ago, I was expecting that sometime this fall bond yields would start a gradual upwards creep. But the turbulence in world stock markets has probably delayed this. According to the Global Dow Index, world stocks have fallen by 9 per cent versus two weeks ago. If this persists (or worsens), the impacts on business and consumer confidence will negatively affect economic growth during the coming year (the impacts are not instantaneous). The first major sign of economic impacts in Canada will come via the resale market reports for September that will be released in October (these events started too late to meaningfully affect the numbers for August). Interestingly, the drop in U.S. bond yields this time has not been as substantial as during previous waves of fear (U.S. bond yields are about ┬╝ of a point higher than in those prior dips). But, in Canada, yields fell further and are now close to their all-time lows. This suggests that there are more fears about prospects in Canada than in the U.S.


All of these ramblings aside, my storyline is essentially unchanged: rates for 5-year fixed rate mortgages are likely to increase slightly during the coming months, but I expect that by year end, 5-year rates at or below 3 per cent will still be widely available.

Will they move again? The Bank of Canada has reduced its official rate (the "overnight rate") twice this year (on January 21 and July 15). The next meeting date (September 9) is too soon to drop the rate again: the BoC will want to see more data before it concludes that further action is required (and to judge whether the stock market swoon will be lasting and will have material impacts). Secondly, while the BoC is definitely independent and apolitical, it will be reluctant to say anything that might influence the election (I can imagine the heated debates that would occur if the BoC was seen to be more worried about the economy). More likely, by the following meeting date (October 21), we will have more economic evidence. If the September resale numbers show a big drop (say, more than 8 per cent year-over-year) and we see a few more major layoff notices from the oil patch, then I we could see another rate reduction in October. Most likely though, we are unlikely to see any further changes (rises or drops) for the overnight rate, prime rates, or variable mortgages until well into 2016.

Dr. Ian Lee - Program Director, Carleton University

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Supply and demand for mortgage funding for fixed rate mortgages appears balanced. There is little fluctuation in the Government of Canada 3-5 year bond trend. Thus, it is unlikely fixed rates will remain unchanged.

Canadian exports are finally taking off and job creation continues. According to Statistics Canada, the Canadian economy has created a net 193,000 jobs in the last 12 months. Automobile and home sales continue to do well. The U.S. economy continues to perform strongly. And yet, some confused souls characterize this performance as a recession. Unlike those critics, Bank of Canada Governor Stepehn Poloz is a very good economist and understands the empirical economic data. For these reasons, the BoC will not reduce its rate again, as there is no need to. The last two rate cuts and most of the economic damage caused by the oil price shock has been absorbed by the Canadian economy.

Kelvin Mangaroo - President of RateSupermarket.ca

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Five-year government bond yields have stayed within a very tight 30-basis point spread over the past four weeks, as the financial debt market remains in high demand amid global equities turmoil. Lenders won't stray far from the discounted rates offered throughout the summer this autumn.

Oil continues its downturn, but positive signs of economic rebound could give our central bank the room it needs to hold off on further immediate monetary policy. This has been reflected in a slight GDP uptick in June and promising export activity, which has been fueled by a lower Canadian Dollar. As well, anticipated rate liftoff action from the U.S. Fed could put further downward pressure on the Loonie. I expect the Bank of Canada will take a medium-term wait-and-see approach, and will review Q3 economic data before pulling the trigger on another rate cut.