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Tag5 year bond yields

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”

Bank of Canada Rate cut is positive news… don’t listen to fear mongers.

fear FEAR..!  They say fear motivates us to do things we shouldn’t.  If you’ve been reading the News Headlines for the past several weeks, you’ve been hammered with RATE HIKE FEARS!  Everyone was saying rates were gonna go up.

It wasn’t just speculation, it was a foregone conclusion.  Almost factual!   There were headlines even reporting how much of an impact these new ‘higher rates’ would affect our lives, our budgets, our house values, our savings, etc.    We saw so-called ‘Experts’ recommending we lock into long term Fixed rates!   There was one articles telling us we should consider selling out homes!   I mean if you didn’t know better, you would think the sky was falling!

Panic was starting to set in for thousands of Canadians.  I was getting calls from concerned consumers asking if they should be doing anything with regards to their mortgage, their investments, and other personal finances. Continue reading “Bank of Canada Rate cut is positive news… don’t listen to fear mongers.”

Unexpected job loss report and effect on mortgage rates.

unemployment Last week’s Employment Stats shocked everyone when we didn’t see the expected 14,000 new jobs created as Economists were expecting.  Instead, we got hit with a reported 46,000 jobs lost in December.    Economists aren’t always accurate with their forecasts (news flash) but they usually aren’t this far off either. We won’t look at why they miscalculated here, but I do want to look at the effects of this bad news on your mortgage.

EFFECT ON FIXED MORTGAGE RATES

Higher unemployment and job loss is never a good thing.  We’re not celebrating here.   But we need to understand how it affects our mortgage rates.     When it comes to rates, bad economic news is good news.    And we saw the effects almost immediately.  Bond yields dropped by around 0.15% to 1.73%, taking the pressure off Lenders to raise rates (fixed mortgage rates are priced closely to Govt of Cda bond yields).   This means fixed mortgages won’t go up anytime soon and could even fall should the bond yields remain at this level. Continue reading “Unexpected job loss report and effect on mortgage rates.”

5 year Fixed rates are going up.. time to consider Variable rate.

graph trend upThe 5 yr Gov of Cda bond yields hit a 2 yr high on Friday reaching just over 2.00%.  That’s up around 0.35% since mid July and up around 0.75% since May.   The increase started in May when the U.S. Federal Bank Chair, Ben Bernanke, made some comments about possible easing of the Fed’s stimulus program beginning as early as September.

Fixed mortgage rates are closely tied to the Gov of Cda bond yield.   When the yield goes up, mortgage rates are sure to follow.  With 5 yr fixed rates expected to rise, it makes for an interesting mortgage market.  Which product and term is best to choose today?   The answer is different for everyone.   We all have different needs, goals and risk tolerances.   Continue reading “5 year Fixed rates are going up.. time to consider Variable rate.”

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