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Fixed mortgage rates expected to dip while Variable rates are on the increase come September

Fixed Mortgage Rates Drop in August

Canadians should expect lower fixed mortgage rates as lenders respond to

dropping bond yields, while variable mortgage rates should increase

following the Bank of Canada's rate announcement at the beginning of

September.

Fixed mortgage rates: Down

The majority of our panel members believe fixed mortgage rates will decrease

in August, and during the first few days of the month we have already seen

this happening. As mortgage lenders react to lower bond yields, their

continued strong demand for residential mortgages is increasing competition

for mortgage customers.

Dr. Ian Lee, Director of MBA Program at Carleton University summarizes this

scenario well: "There is an excess of mortgage funds and lenders chasing a

decreasing number of mortgage borrowers." This increased competition is

likely to be good news for mortgage shoppers resulting in price cutting and

lower fixed mortgage rates.

Variable mortgage rates: Up

Expect variable mortgage rates to remain level in August, but to increase at

the beginning of September following the next Bank of Canada rate

announcement. The Central Bank's most recent Monetary Policy Report

indicates that an increase in the Bank's trend-setting overnight lending

rate in September is likely.

Despite the weak US job numbers and soaring unemployment in most of Europe,

the Bank predicts a gradual reduction in monetary stimulus in Canada. With

only three Bank of Canada meetings remaining till the end of the year, it is

likely that the September announcement will push interest rates up.

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