Expert rate outlook released

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A panel of market leading real estate market analysts argues that fixed rates will increase in the next 30-45 days, citing recent bond yield increases and expecting rates to follow suit.

“At the time of writing, mortgage rates have not followed the rise in bond yields. This has meant that lenders' margins are being reduced,” Will Dunning, chief economist for CAAMP wrote as part of the RateSupermarket market outlook panel statement. “It is quite likely that any further rises in bond yields will lead to correspondingly higher mortgage interest rates.”

However, despite the expected increase to fixed rates, the panel believes rates will still remain historically low.

“Given that this has been one of the most competitive mortgage markets in recent history, prospective homebuyers will continue to access a historically low cost of borrowing in the months to come,” Kelvin Mangaroo, president of wrote.

The one voice of dissent, Dr. Ian Lee, program director at Carleton University believes fixed rates will remain unchanged for the time being.

“In plain English, the yield is increasing – but ever so slightly. Given that mortgage lending margins are so narrow, this may put a little upward pressure on 5-year fixed rates,” he wrote. “However, contradicting that is the increasing mortgage lending competitiveness caused by a slowing in demand as consumers are extended in terms of borrowing.”

Meanwhile, panel members agreed that variable rates will remain unchanged, citing expected economic recovery and the Bank of Canada’s stance on maintaining the overnight rate.
  • Darr Robbins on 2015-05-14 5:24:32 PM

    IMHO, although bond yields have increased slightly in the short term, readers should not be swayed into believing that the longer term trend in falling yields has reversed. This compressing yield trend will continued much longer as there are no practical solutions for banks and governments to exit the mess they have created.

    Western governments are running massive deficits at current yields. They will certainly fall off the fiscal cliff should rates normalize. Central banks will not allow this to happen as it would surely drag the over-leveraged citizens, corporations and financial institutions along for the fall. Consequently, the Bank of Canada will continue their bond buying binge to prevent a massive de-leveraging that would otherwise trigger an economic depression. These bonds will be purchased with newly printed dollars thus diluting the purchasing power of those dollars already in circulation. This is extremely inflationary. Income will continue to be diverted to staples at the expense of discretionary items. Expect the prices of things you need to rise while the prices of things you want will fall.

    In the longer term, mortgage rates may still compress to keep up appearances however credit issuance standards will be more stringent and selective. Mortgage renewal could become a significant risk going forward.

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