Bank of Canada raised their Target Rate by 0.25% to 1.00%. We will see the Retail Bank’s Prime lending rate go up from 2.75% to 3.00%.
Governor, Mark Carney, said “Any further reduction in monetary stimulus would need to be carefully considered in light of the unusual uncertainty surrounding the outlook,” . This is sounding like we won’t see any further hikes til some time next year as the Government evaluates the economy and the global markets.
I still like Variable rate… at 2.30% to 2.50%, this is still much better than the 5 year fixed rate of 3.75%, which is what we are seeing today.
Fixed mortgage rates are sitting at around 3.89% for a 5 year closed and 2.90% for a 3 year closed. These are definitely attractive rates and are at or near historical lows…
Why? The Bond market has dropped significantly over the past 3 months…. this has come as a surprise to many but not all… The economic recovery isn’t as certain as we once thought… with mixed data coming out about our economy, this uncertainty will cause interest rates to stay low…
Once trend that has caught our eye is that lenders are now offering Mortgage Brokers a higher commission to sell a 3 year and a 5 year fixed rate product… and although that may attract more busy from some, I’m still recommending the Variable Rate mortgage, even though we get paid less.. it’s always about doing what’s in our client’s best interest.
Variable rate has been a proven winner over the past 25 years… I don’t think our economy is as strong as some would think….There has been improvement but we have a long way to go before we can say we are out… Hence the lower fixed mortgage rates… Variable rates will increase but it will be a slow, steady climb… with current Variable rates at 2.10%, Variable has a long way to go before it is not cost-effective.
Here’s an updated chart that shows Fixed and Variable mortgage rates over the past 25 years…. click here.
Fixed rates drop again
Seems like it was just yesterday when we heard reports of mortgage rates going way up…. Posted Fixed rates fell again with RBC dropping their 5 year fixed rate to 5.59%. Discounted 5 year fixed rates are now available at 3.89%…and Variable rates are hovering at around 2.10%.
Canada loses 139,000 jobs in July
Quoting a report from CBC.ca, Statistics Canada shows some cities improved their unemployment figures…but overall, we have few full-time jobs and more part-time jobs… The recovery from the recession still seems to be headed in the right direction but this is definitely a speed bump that will slow us down..
The good news is for borrowers of money… interest rates shouldn’t go up in any hurry… in fact, we have seen fixed rates drop over the past 40 days…. watch for flat or modest rate movement over the next several months.
We’ve reached the middle of summer and there is very little to report… hey, that’s a good thing.. remember, boring is good when it comes to mortgage rates..
Remember those Experts that called for people to lock into a long-term fixed rate at or around 4.00% last year?.. Variable rates have been under 2.00% for over a year and recently went above 2.00%…. I do understand why some would call for us to lock in….but I’m glad I wasn’t one of them…
Look at today’s 5 year bond rate and it’s 2.29%… WOW! That’s unbelievably low… the 5 year fixed rate is priced from the Bond market and normally, we will see a spread of 1.20% to 1.40% above that… so really, we should be seeing fixed rates as low at 3.50% but the Banks are taking advantage of the spreads and maximizing their profits…..
Let’s not be in too much of a hurry to improve bank profits….
Watch for possible increases in fixed and variable rates later this year.. but remember, we’re still near record low rates.. they will go up, but slowly… no need to panic… yes, this is boring news.. but boring is good…
In case you’re wondering how the G20 Summit affected Canada’s mortgage business…. Most Lenders have their head offices in the heart of Toronto… and most all of them issued notices that turnaround times and disruptions may occur…Fortunately, Lenders have back up plans because of past emergencies likes 9-11, SARS and the Blackout.
Oddly enough, the Big Six Banks all lowered their Retail mortgage rates over the past few days…. 10bps is not a big drop, but any rate drop should be welcome news to all Canadians.
- Posted 5 year fixed rate is 5.89%. This is also the qualifying rate for mortgages with less than 20% down payment and terms less than 5 years and for Variable rate mortgages…..
- The best discounted 5 year fixed rates seem to be around 4.39%…
- No changes for Variable rate pricing… Big Six are advertising Prime less 0.35% as their best but wholesale rates are at around Prime less 0.60% and sometimes better.
- Big Banks giving big push for Hybrid mortgages….and although I’m not a fan of these products for most of us, there may be a place for them for some of us….just make sure you are fully aware of all the pros and cons of this product.
Just a personal comment about the G20 Summit… as someone who was born and raised in Toronto, I was saddened by the images that flashed across our TV set…police cars on fire…broken windows, masked protesters…This isn’t a true reflection of our city…our city has the reputation of being one of the cleanest, safest and friendliest in the world… I hope that message made it’s way to the rest of the world….