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CategoryRate forecast

Bond Yields are up… will Fixed Mortgage rates follow?

graph trend upFixed 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… Continue reading “Bond Yields are up… will Fixed Mortgage rates follow?”

Record low Bond yields means even lower fixed mortgage rates

graph trend downFixed mortgage rates are tied into Govt of Cda bond yields.  As the yields go done, so does the fixed mortgage rates.. well, usually.. more on that later..These bond yields have hit all-time lows in the past week… Yesterday, they were as low as 0.55%...  To put that into perspective, the 5 yr bond yield is lower than the Bank or Canada overnight rate, which now stands at 0.75%.  Another historical event.  That almost never happens.

Check out these 2 historical charts to compare the Bank of Canada rate from 1935 to Dec 2014 and 5 year Govt of Cda bond yield from 1980 to Dec 2014….

If you’re wondering what this means for you, a Canadian consumer, it means mortgage rates should go even lower.   Institutional investors are pricing in a further Bank of Canada rate cut at their next schedule meeting on March 4th, 2015. Continue reading “Record low Bond yields means even lower fixed mortgage rates”

TD green or TD GREED?!. as they refuse to lower the Prime rate!!

greedy banker Yesterday’s rate cut announcement by the Bank of Canada (BOC) governor, Stephen Poloz, caught all Economists by surprise.  The BOC cut their overnight rate by 0.25%.   Historically, and traditionally, this meant that the Bank Prime rate would follow.  Bank Prime rate is 3.00% and we expect it to fall to 2.75%TD.

But HOLD ON!…Today, it’s the BOC governor, Poloz, that will be surprised as TD Bank says they WON’T  be cutting their Bank Prime rate!  The BOC cut the rate to help stimulate the economy.  Businesses borrow commercial funds priced against Bank Prime… and consumers borrow lines of credit and Variable rate mortgages against Bank Prime. Continue reading “TD green or TD GREED?!. as they refuse to lower the Prime rate!!”

Interest rate surprise? Not to our readers! : Bank of Canada drops key lending rate to 0.75%

big newsLast week, I made a bold statement about interest rates.   I said rates will remain low for some time.   And they could even decline.

That forecast was met with a certain degree of criticism.    Well, no surprise for CanadaMortgageNews.ca followers, the Bank of Canada cut the rate by 0.25% to 0.75%.

This means Variable Mortgage rates will fall by 0.25%.   It also means we’ll probably see fixed rate mortgages also fall….. As I predicted.

Stay tuned for more details on this…

http://www.ctvnews.ca/mobile/business/key-interest-rate-unexpectedly-lowered-1.2198493

Your best interest is my only interest.   I reply to all questions and I welcome your comments.  Like this article?  Share with a friend.

Steve Garganis 416 224 0114 steve@mortgagenow.ca

Bank of Canada says no rate hikes, but possible rate drops!!

stephen poloz  Last week, the Bank of Canada governor, Stephen Poloz, held the first of 8 scheduled meetings to set the Target Rate.    This is the rate used to set the Bank Prime rate which currently sits at 3.00%.   No surprise, no change in the rate.  It has been the same since Sept 2010.

From 2011 to 2013, the previous Bank of Canada governor, Mark Carney, continually announced of a pending rate increase.   But late last year, Poloz changed the tide when he announced it could be a few years before rates go up.   One of the key drivers for rate hikes is inflation.  The BoC target for inflation is between 1% and 3%.  If inflation goes above 3%, we can expect rate hikes.

Inflation is not a concern.  In fact, there are concerns about deflation as the current inflation rate sit at 1.2%.  Some experts believe we could see the BoC rate drop.  Great news for anyone in a Variable rate.   We are also seeing the govt of Cda bond yields drop.   Friday’s close was down to 1.59% for 5 yr bonds.  Haven’t seen that level since June 2013.   This means Fixed mortgage rates will probably go down further. Continue reading “Bank of Canada says no rate hikes, but possible rate drops!!”

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