Variable rates to stay low through 2011

Variable mortgage rates:

The Bank of Canada will hold off on increasing interest rates during the first half of 2011. This means variable mortgage rates will also remain at low levels during this time and then gradually increase from there. As the Canadian economy continues to recover, the sluggish progress in the US and the frailty of the EU, tasks the Central Bank with maintaining a tricky balancing act.

"Governor Carney and his people will be trying to thread the needle on interest rates trying to balance the rising loonie against low interest rates that encourage further consumer indebtedness", says Dr Ian Lee, Director of MBA Program, Sprott School of Business, Carleton University.


Fixed mortgage rates:

The decreased demand for mortgages and relatively stable bond yields, leads us to believe that fixed mortgage rates will remain unchanged for the month of January. However, this outlook is susceptible to change with additional defaults in Europe or poor results on upcoming US economic indicators.

Also, ultra low interest rates for the past few years have fueled a borrowing frenzy creating concern about mounting debt levels for Canadian consumers. It wouldn't be a surprise if the government made a policy change to address the debt problem by adjusting the mortgage rules, likely spurring a change in fixed rates as well.