Experts: Mortgage rates will decline

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Brokers and their clients, as reluctant as they may be, may owe tea partiers in the United States for a vote of thanks with their antics expected to lower fixed rates in the short term in Canada.

 “Failure to increase the debt ceiling will result in default by the U.S. Government,” Dr. Ian Lee, director of the MBA program at Carleton University’s Sprott School of Business. “These events in conjunction with less than robust growth have placed downward pressure on the yield on three - five-year Canada bonds, which in turn suggests modest reductions in fixed mortgage rates.”

Following what has been a whirlwind number of weeks for mortgage rates, a panel of mortgage experts assembled by have come to a consensus for the next month: Mortgage rates will decline.

“The U.S. Fed surprised the market by not announcing a reduction in their bond buying last week as anticipated by many bond traders the world over,” Dan Eisner of True North Mortgage said. “This had the intended effect of lowering long term bond yields in the U.S., followed by a corollary effect in Canada. Although the effect was somewhat muted in Canada we will still see some lowering of long term mortgage rates in the upcoming weeks.”

Last month, the four panel members – which include Eisner, Ron Butler, President Kelvin Mangaroo and Dr. Ian Lee – almost unanimously agreed that rates would continue to climb. This month, however, there was no division.

“I adhere to the best quote I heard last week about Quantitative Easing: ‘it is not a matter of will it end, this is only a question of when it will end’, according to Butler. “The bond market has already priced in the fact that Quantitative Easing will end so I don't expect anything but a levelling off of fixed mortgage rates with the possibility of a tiny short term drop.”

  • JSydneyH on 2013-10-11 7:33:49 PM

    Great panel. Unfortunately, I'm still not convinced that low interest rates are not our new norm. Sure, we can talk about historical norms for interest rates, but the state of the global economy is not the same as it has been historically. If countries like Ireland, Greece and Portugal can throw the world economy into a tail spin - if countries like China continue to manipulate their currency - if the stated goals of the Federal Reserve remain constant, then we may never see a return of historical interest rates.

    This isn't our grandfather's world anymore - and I believe we are writing our own history.

    We only have to look at the failure of Canadian businesses to invest in themselves over the past several years when interest rates were exceptionally low to realize things aren't what they seem. Governments at all levels are cutting back on what they spend, businesses have not yet opened up the purse strings and the Canadian consumer has been chastised by our Finance Minister for spending borrowed money when interest rates were low. Who is going to get Canada out of this recession? Business hasn't and the government lacks the will to do so.

    I'm not convinced that we're out of the woods yet.

  • Gavinda on 2013-10-15 1:44:24 PM

    7 & 10 yr fixed terms are the way to go with rates so low!

  • Gavinda on 2013-10-15 1:46:21 PM

    7 & 10 yr fixed terms are the way to go with rates so low!

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