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TagBond yields

TD & RBC raised the POSTED rate… but not their REAL rates

Rate Image, May 2018

Much has been written about last week’s Posted rate hikes by TD and RBC. Don’t panic! This is just their posted rate – it’s not the actual rate they give to clients.

I do, however, think we’ll see a minimal rate hike in the coming weeks due to five-year Government of Canada bond yields increasing slightly. Fixed rates are priced closely to bond yields.

Continue reading “TD & RBC raised the POSTED rate… but not their REAL rates”

Unexpected Trump win on Canadian mortgage rates and market.

US electionThe surprise Donald Trump US election win has caught many off-guard.  The pollsters have been quiet to comment after they all predicted a Clinton win.

Here’s what week 1 looks like, after the Trump win.  The first few days saw some chaos in the stock market.  Stock market went down and so did Govt of Canada bond yields.

However within a day, the stock market began to rise.  The Dow Jones hit all time record highs.  The Toronto market was up also, but not as much as the US.  The Canadian $ took a bit of a beating.  And the Govt of Canada bond yields started to rise.  This last one is important to watch.

Fixed mortgage rates are closely tied to govt of Canada bond yields.  We’ve now seen Bond yields increase by over 0.35%.  that’s a huge increase in such a short period of time.   Banks and Mortgage Lenders have begun to increase fixed mortgage rates.

Investors are betting on Trump stimulating the US economy and taking no foreign prisoners.  That’s caused some jitters in the markets.  I’m watching the markets closely.   This could just be a short term reaction.  Or, it could be an adjustment to the record low mortgage rates.

MY VIEW…   Continue reading “Unexpected Trump win on Canadian mortgage rates and market.”

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”

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.”

When the U.S. sneezes, Canada gets a cold… I’m getting the sniffles…mortgage rates are headed up.

US sneezes Canada catches coldYesterday, the U.S. Fed Chairman, Ben Bernanke, announced he ‘could’ start to ease their stimulation of the economy later this year.   That small announcement has had a huge impact on the global stock markets and bond yields.   Stock Markets are down around 2.00% around the world as of 2.30pm today.

The U.S. has been buying around $85billion worth of bonds every month in an attempt to keep interest rates low.  And with that simple announcement yesterday, the world’s markets have reacted.   Bond yields have started to climb…

Our own 5 yr Govt of Cda bond yield is up to 1.75%.  That’s up around 10bps from yesterday, and up 60bps from the beginning of May.  In fact, we haven’t seen these levels since October 2011 and again in March 2012.   We already received warnings from our Lenders that wholesale mortgage rates are likely to go up.   Remember, bond yields affect Fixed mortgage rates.. but they will have an indirect affect on Variable rates, too. Continue reading “When the U.S. sneezes, Canada gets a cold… I’m getting the sniffles…mortgage rates are headed up.”

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