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TagCda 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”

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