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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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JULY 2019 OVERALL SUMMARY

Two from three of our panelists this money are calling for a stasis in fixed rate mortgage rates. Dan Eisner the only dissenting voice, as he cites progress in the US/Mexico and US/China trade relationships as a reason for more positivity in the economy. 

Our panel is unanimous on variable rates, citing a tepid-yet-stable economy for a hold-steady approach from the Bank of Canada, and increasing competition as a factor in the stablization of low rates from the banking sector. 

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This Month's Panelists

Dan Eisner

President,

True North Mortgage

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Donald Trump appears to be ready to restart talks with China and the potential trade war with Mexico is off the table. As result we will likely see fixed rates move up a bit over the next couple of weeks.

Inflation remains tepid, and the Central Bank remains cautious. The possibility of a prime rate change right now is remote. We won't likely see a change in the discount off of Prime offered to clients any time soon.

Will Dunning

Chief Economist,

Mortgage Professionals Canada

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The Canadian economy remains very strong, although there has been a deceleration of growth during the past year: while key indicators continue to show growth, the rates of growth are only moderate. This slowing partly reflects the delayed impacts of interest rate rises that occurred during 2017 and 2018 (reckless economic policies in the US are an additional important factor). In consequence, signs of economic weakening have caused interest rates to fall this year – and by considerable amounts.
In theory, this should lead to stronger growth next year. But, the main channel through which interest rates work is the housing market, and housing activity is being suppressed by the mortgage stress tests, which are preventing tens of thousands of Canadians from pursuing their home ownership dreams. Negative economic consequences from this are developing slowly. As a result, the Canadian economy is likely to remain relatively weakened for some time, and this should keep interest rates relatively low well into next year.

With the Canadian economy still quite strong in a long-term view, and with the Bank of Canada continuing to expect further strengthening, it is quite unlikely to change its key interest rate during the next few months. Therefore, variable mortgage rates are unlikely to change in the near term.

Any change in variable rates would therefore have to be due to changes in the discounts (versus their prime rates) that lenders offer. These discounts are already larger than average (reflecting that the lending environment has become quite competitive). Therefore, it is unlikely that there will be further reductions.

Dr. Ian Lee

Program Director,

Carleton University

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While bond yields on 5 year GoC bonds have declined from almost 2.5 in late fall to around 1.3, it seems to have bottomed out now. The markets appear to have digested all recent Trumpian disruption and consequent uncertainty on the China front.

Canadian economic growth is tepid notwithstanding the very low unemployment numbers. And the Canadian dollar is trending in the mid upper 70s. A rate cut would push the Canadian dollar even lower causing more pain for consumers while a rate increase would push it up enough to hurt exporters who are not doing so well. Most importantly, there is no justification - or signals - of a Bank of Canada rate change any time soon.