Fixed mortgage rates are tied closely to the Govt of Cda bond yields. And bond yields are up… Since mid April, the 5 yr Gov of Cda bond yield has gone from 0.75% to 1.07%. That’s a 0.32% jump. Normally, we would see fixed mortgage rates go up.
So far, no increase. But that’s probably more to do with a competitive Spring housing market. This is when most house sales and mortgage transactions take place. The Banks need to maintain certain market share levels in order to keep shareholders happy. They are willing to sacrifice a little profit margin (and I do mean little… they seem to make up for this with higher service fees as was recently reported, but let’s not get into that now…).
If the bond yields continue to increase, we will see fixed mortgage rates rise. That’s an automatic. The real question is how long will the bond yields continue their climb? It will be interesting to watch the next few months. We can expect to see some rate increases as the Spring market ends and Banks look to increase their profit…. A pattern that repeats itself year after year.. but here’s what you can do to protect yourself… Read the rest of this entry »