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Expert rate outlook released

By Mortgage Broker News | May 15, 2015

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 RateSupermarket.ca 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.

http://www.mortgagebrokernews.ca/news/expert-rate-outlook-released-191332.aspx