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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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Fixed Rates - Down Variable Rates - Unchanged

The panel is split between rates going unchanged or decreasing in Q1 of 2019.

Majority of the panel believes rates will go unchanged in Q1 of 2019.

This Month's Panelists

Will Dunning

Chief Economist,

Mortgage Professionals Canada

Fixed Rates - Unchanged Variable Rates - Up

A spate of uncertainty and fear about the economic outlook has harshly affected financial markets, including stock markets and bonds. The yield for five-year Government of Canada bonds – the key benchmark bond – peaked at 2.46 per cent in early November. But as of December 10, it fell by almost half a point to 2.0 per cent.

Mortgage interest rates, however, have not followed those reductions. The "special offers" advertised by major lenders have not reduced. Lenders are waiting to see if the lower bond yields will be sustained. In addition, the mortgage market is highly competitive. If yields stay down, then mortgage interest rates could very well decrease in the coming month. But economic conditions are still very positive in Canada, the U.S., and indeed much of the developed world. Therefore, it seems likely bond yields will reverse despite the recent reductions, and could even surpass the recent peak (the 2.46% seen in early November) sometime during the first half of 2019. By mid-year, typical special offer rates for five-year fixed rate mortgages may be in the range of 4.0 per cent.

The Bank of Canada has now raised its overnight rate five times in the last 18 months, by a quarter point each time. No change was made at the most recent meeting on December 5, but the associated statement indicates that the BoC is becoming less optimistic about the economic outlook and less concerned about future inflation. It is still saying that its key interest rate will need to rise further in order to control inflation.

Until recently, most economic commentators expected the Bank to increase its rate by one to 1.25 points over the coming year, but with the softening of the BoC's message, those expectations are being downshifted.

As I mentioned in the last outlook, I expect there will be one or two more increases in 2019 (on January 9 and/or March 6). And during the coming months, the rate increases from this year will increasingly weigh on the economy. In addition, the stricter mortgage stress test will continue to weaken the housing market and this gradually affect the broader economy. I expect that before the middle of next year, this trend of rising interest rates (long-term and short-term) will end.

Dan Eisner


True North Mortgage

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Fear and anxiety has eroded bond yields over the last few days, and as such, I expect fixed rates to decline.

Six weeks ago, the Canadian central bank sounded positive with regards to its outlook on the economy. Now it seems like fear of trade wars and rising tariffs are impacting their confidence. It doesn't look like prime rates will rise as quickly as some previously assumed.

Dr. Ian Lee

Program Director,

Carleton University

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Bond yields have declined by approximately half a point since September. Home sales in Canada's two largest markets have fallen year-over-year (15 per cent in Toronto and 43 per cent in Vancouver). And as auto sales are also starting to decline, it seems like this story is far from finished (Does anyone smell the pungent scent of recession wafting in on the Arctic winter winds?). There is no evidence of trends that could potentially lead to an increase in fixed mortgage rates anytime soon. Indeed, if anything, the data suggests downward pressures on fixed mortgage rates going forward.

Only six weeks have passed since the Bank of Canada raised its key rate, using confident, hawkish language that suggested it would continue to increase the rate until it hit its posted neutral rate of three per cent.

Since then, that self-confident swagger has seemingly vanished and been replaced with blooming confusion in the Bank's most recent announcement. It's even suggested that the neutral rate is now only two per cent! To be fair, the BoC now factored in the hit to the Alberta economy, with WTI down $20/barrel since October, as well as Western Canadian crude scraping the bottom of the barrel (in defense of this bad pun, I rely on Oscar Wilde who said, "I can resist everything except temptation"). The Bank also noted declining business investment in Q3 and declining momentum going forward. And while Governor Poloz cannot mention or discuss Bill C69, which will largely thwart resource development in Canada, I should note that this bill is in the Senate nearing approval and passage into law. And the increasing chorus of analysts predicting a recession in 2019 cannot have escaped the attention of Bank governors.

Only three days after the BoC's December announcement, Statistics Canada also reported almost 100,000 new jobs – resulting in the lowest unemployment rate since 1976. That being said, the Bank governors will have to adopt the Greek god Apollo's skills at prophecy and oracles in January 2019. In light of this dramatic increase in contradictory information and increased uncertainty, it is far less likely the Bank will announce a rate increase in early 2019.

Shawn Stillman

Mortgage Broker,

Mortgage Outlet Inc.

Fixed Rates - Down Variable Rates - Unchanged

Over the last 30 days, most lenders raised rates at least once, but given the Bank of Canada's most recent outlook, we expect this to be reversed. Bond yields since early November have fallen 40bp and have been flat since February 2018. But given the drop in bond yields, it is widely expected that fixed rates are heading down in the short term.

Still, over the next 12 months, I would not be surprised to see fixed rates increase by 0.25 to 0.50 per cent. There are lenders offering as low as 3.39 per cent for a five-year fixed-insured mortgages, but most lenders are currently between 3.54 per cent and 3.99 per cent for insurable and uninsured mortgages.

As widely expected, the Bank of Canada kept the benchmark rate at 1.75 per cent at its last meeting, but more importantly, the positive language from the October announcement disappeared. The Bank's concluding statement for 2018 mentioned that the pace of future interest rate increases will be determined by a number of factors, including the effect of higher borrowing costs on household spending, the trade wars, the persistence of the oil-price shock, and the central bank's assessment of the economy's capacity.

In saying this, the Bank has made it clear that it will no longer be pushing to increase the rate to 2.5 to 3.5 per cent. The major banks agree, and have cut their expectations as well, from three or four increases in 2019 to maybe one or two (with none occurring in Q1). The major banks have held their variable rates at prime – 0.7 per cent – and monolines are still offering rates as low as prime – 1.24 per cent – on uninsured and insurable mortgages.

Many consumers are taking the variable option with such deep discounts. And I predict the discount offered on variable mortgages to remain flat over the next few months.