Analysts Comment When Mortgage Rates Will Rise

March 29th, 2011

When will mortgage rates rise? According to the experts, this summer. Here are their comments:

“…over roughly the past twenty years, the BoC has generally avoided starting a tightening campaign in an election. It only did so in 1997, and that was because the economy was rapidly healing after the disaster of the first two thirds of the 1990s via over 734,000 jobs having been created in the back to back years of 1997-98. Now, if a May or June vote is in the cards, that adds to a long list of reasons why most analysts have abandoned much of any notion of a Spring hike.”

Derek Holt and Gorica Djeric (Scotiabank’s DailyPoints)

“We take this opportunity to reinforce our longstanding view that the BoC is on hold until October of this year (or possibly later)…”

Derek Holt and Gorica Djeric (Special Update)

The argument for a near-term interest rate hike is now less compelling due to lower than expected inflation in February and a strong Canadian dollar.

Citigroup FX strategist Greg Anderson

CIBC says the Bank of Canada now won’t raise interest rates until July (it previously forecast a May hike).

“The bank may be reluctant to use the April meeting to signal a May hike, given that April will come in the middle of an election,”

CIBC chief economist Avery Shenfeld (Financial Post)

“In a nutshell, we believe the market has overreacted by pushing the next Bank of Canada tightening out to October. Rates are far below neutral, the output gap is disappearing fast, and even the U.S. economy is rounding into much better shape. These factors should rule the roost by the time the July decision date rolls along.”

Doug Porter, deputy chief economist at BMO Capital Markets (FOCUS)

“If [the BOC] had any intention to raise rates in May, normally they would have sent a signal in the monetary policy review in April. But if that’s in the middle of [an election] campaign, they might mask the language.”

Doug Porter, deputy chief economist at BMO Capital Markets (Canadian Press story)

“I don’t think (the first hike being in October) is consistent with economic fundamentals. It’s more consistent with a lot of the financial market turmoil and fears of issues in Japan and the Middle East accelerating. The bigger issue is the fact that growth is certainly stronger than (the Bank of Canada) expects.”

David Tulk, chief Canada macro strategist at TD Securities (National Post story)

“..ongoing event risk associated with Middle East unrest and Japan’s tragic natural disaster, the risk to the recovery posed by elevated oil and commodity prices and CAD strength all argue for steady policy through mid-year, which will be facilitated by tame underlying CPI and ample spare capacity … we now peg the July of 2011 announcement as the first in a series of 25 basis point rate hikes expected to last into next year.”

Mortgage Rates Drop!

March 24th, 2011

Over the past couple of weeks bond yields dropped 30 bps. Correspondingly mortgage rates have seen a bit of a decline as well. The Royal Bank of Canada has dropped their 5-year posted rate from 5.44% to 5.34%. Also other reputable mortgage lenders in the industry have been dropping their “special” 5-year fixed rates by 5-10bps as well. Given that mortgage rates are remaining fairly stable and property prices have been pretty much stagnate lately, perhaps early spring may be busier than analysts originally forecasted. It seems that today is still a great time to buy real estate in the GTA and Ontario.

Posted by First Toronto Mortgage (

March 18th Is Here…

March 18th, 2011

Today insured mortgages (mainly mortgages with less than a 20% down payment) follow new, stricter rules. Here is a summary of the new mortgage rules for insured loans:

1. The maximum amortization period will be 30 years (it was 35 years).
2. The maximum LTV on a refinance will be 85% (it was 90%).
3. Elimination of government insurance on secured lines of credit (HELOCs).

First Toronto Mortgage (

When Will Rates Increase?

March 5th, 2011

It’s all over the news…very soon interest rates will soar higher. For the past few years we have been blessed to borrow at a low cost of capital, but those times are likely over. But when will we see the next rate hike? Well according to the Big 6 Banks, it can be as early as April of this year:

CIBC: “We’re sticking with our view that an upgraded economic outlook in April’s policy report will pave the way for a rate hike in May, assuming the C$ settles down a bit before then.”

BMO: “We judge that the bank is waiting for evidence that U.S. economic performance is strong and steady enough to ensure that Canadian exports will contribute to Canadian economic growth regardless of the level of the loonie. We’ve pencilled in a July resumption of rate hikes.”

National Bank: “There is a compelling case to be made for higher interest rates in Canada since excess supply is closing faster than previously anticipated by the Bank…We remain of the opinion that the next rate hike will occur at the May 31 interest-rate setting meeting.”

RBC: “The Bank is unlikely to stay on the sidelines for long if the data continue to show that the economy is maintaining its upward momentum…We maintain our call for 100 basis points of rate increase in 2011 with the first hike coming in May 2011.”

Scotiabank: “…When it comes to forecasting the resumption of rate hikes by the BoC … we think that doesn’t occur until October of this year.”

TD: “In the wake of today’s statement, markets will pare back bets that a rate hike is in the pipeline in April or May…A next hike in July still appears the fairest bet.”

The bottom line is that rates will increase very soon, so if one needs to borrow capital, today is a good day to do it.

First Toronto Mortgage (

March 18th Is Approaching

March 1st, 2011

The new mortgage rules for insured loans take effect in a couple of weeks. If you are refinancing, this reduces the maximum amount you can borrow. If you are buying, this reduces the maximum amortization period you can choose. Here are the changes:

1. The maximum amortization period will be 30 years (it currently is 35 years).
2. The maximum LTV on a refinance will be 85% (it currently is 90%).
3. Elimination of government insurance on secured lines of credit (HELOCs).

First Toronto Mortgage (