It’s by no means over and the fat lady hasn’t sung. Mortgage rates will indeed continue to climb headed into October, argues an expert panel assembled by RateSupermarket.ca.
“Climbing U.S. bond yields continue to crush the Canadian bond market as five-year yields have soared from a low this year of 114 to hitting over 200 last week before backing off into the 194-198 range,” Ron Butler of Verico Butler Mortgage said. “Lenders have increased rates in a rush to keep up and while I have no perfect insight into next month's bond yields, I am more worried than positive.”
Of the five panelists chosen, only one – Dan Eisner of True North Mortgage – believes rates will remain steady.
“Bond yields have been bouncing around the last few days but lack any direction,” Eisner said. “Thus, the recent rate increases we have seen in the mortgage market will remain until we have some better direction to bond yields.”
The panel was rounded out by Ian Lee, director of the MBA program at the Sprott School of Business, who believes the recovering U.S. economy will continue to drive Canadian mortgage rates higher.
“Since the Fed announced earlier this summer it was considering ending QE bond buying, U.S. Treasury bonds have increased over 100 bps in anticipation of this day,” Lee said. “In addition, the U.S. economy is now growing quite nicely, putting additional upward pressure on rates.
"Indeed, rates have increased in the last 30 days at a faster pace than in recent times (and) as the U.S. economy continues to grow, these trends will continue which will continue to push fixed rates up.”
The one thing each of the experts agrees on is that variable rates will remain steady through the month.
“Unlike our American neighbours, Canadian economic growth underwhelmed with only 1.7 per cent growth in Q2, and it's not likely that our Bank will choose to scale back our stimulus efforts in the September 4th announcement,” said Kelvin Mangaroo, president of RateSupermarket.ca. “Both the Overnight Lending Rate and variable mortgage rates will remain unchanged for the time being.”