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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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The gap between fixed and variable rates is expected to widen near-term as fixed rates climb and variable rates stay flat.

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There's more reason for optimism than pessimism in Canada's economy. Fewer people are now fearful of Trump-induced trade ramifications and job growth has been downright perky (358,000 new jobs created this year and the lowest unemployment in 40 years). Bond markets, which are always worried about signs of inflation, have been keying off these developments since September. Canada's 5-year yield has risen strongly—almost half a point—in that timeframe. That, in turn, has lifted fixed mortgage rates. November could see a potential continuation of that trend.

The Bank of Canada isn't likely to be swayed by Federal Reserve rate cuts. Nor will the Bank be heavily influenced by recent federal election results, the ongoing Brexit drama or the ever-volatile Trump administration. Our experts instead believe the Bank will continue its interest rate holding pattern, at least through the end of this year. That means prime rate and variable mortgage rates aren't likely to move for a while. Even if Canada's economy started looking lethargic, don't expect a reactionary rate cut from the Bank right away, our forecasters predict. Governor Stephen Poloz seems content to take his time and weigh the impact of upcoming data on inflation (which has been stuck near two percent). The last thing he wants to do is blow up Canada's debt balloon further with hasty rate cuts.

This Month's Panelists

Dan Eisner


True North Mortgage

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Bond yields seem to be on the rise across North America as hopes for a new trade deal between the U.S. and China improve. If this new-found optimism holds for a few more days, we will likely see fixed mortgage rates rise by 0.1% [near term].

The results of the federal election will not materially change the Bank of Canada's view on the state of the economy. We believe a downward prime rate move is coming, but we don't think it will happen at (tomorrow's) Bank of Canada meeting.

Will Dunning

Chief Economist,

Mortgage Professionals Canada

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Around the world (and especially in the U.S.), financial markets are experiencing waves of optimism and pessimism, which has resulted in volatility for bond yields. As I write this (on October 28), attitudes are currently positive, which has caused bond yields to rise during the past three weeks. Within Canada, the economy continues to expand at a moderate rate. This is occurring at a time when major economic indicators in Canada are at very high levels, and in this situation, we cannot expect growth to be any stronger than it is.

For example, GDP in Canada has increased by 1.3 percent during the past year, which more or less matches population growth. In this environment, I expect that the yield for 5-year Government of Canada bonds should be in the range of 1.50-1.75 percent, and that is where they are. Nevertheless, our mortgage interest rates are currently quite low relative to bond yields. The unusually small gap between bond yields and mortgage interest rates could cause lenders to raise their rates for fixed-rate mortgages during the coming days or weeks.

Evolving conditions within Canada are supportive of the "no change" attitude from the Bank of Canada. Yet, there is certainly risk that impacts from events in other countries will impair our economy. Even if we see some signs of economic weakening in Canada in the coming months, it would take some time for the Bank of Canada to change its opinion that its benchmark rate is at the right level.

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. Is there a chance variable rates could rise? Housing activity has improved during the past few months but is still below average. Therefore, continued competition should prevent rises in these rates.

Dr. Ian Lee

Program Director,

Carleton University

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Canada bond yields appear to have stabilized. Indeed, since June 2019 the range has been very narrow, averaging between 1.20 and 1.60 percent. The economy is chugging along, but there is no evidence for a sharp spike in demand for mortgages. The continuing uncertainty over the Trump impeachment in the U.S. and the uncertain resolution of Brexit puts a damper on any "exuberant expectations"—if they ever existed in recent times.

Key Canadian economic indicators are reasonably strong at present. The labour market continues to show strength. For example, over 130,000 jobs were created in late summer and early fall. In addition, the deteriorating relationship with China seems to have stabilized. There is no evidence of a need to cut rates at this time.