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TagMortgage Rates

Banks slow to lower rates…but quick to raise them

Some things never change…..On Oct 19th, 2010, the 5 year Canadian Bond yield was 1.85%… It fluctuated up and down but staying below 2.00% until Nov 5th when it closed at 2.053%…  We were expecting the Banks to adjust their Fixed rates downward but it didn’t happen..

Since then, it has kept above 2.00% and is currently at 2.27%….  This increase in the Bond yield usually means Fixed Mortgage Rates will go up..  See the chart here.

But earlier this week, the Big Six Banks lowered their posted 5 year mortgage rate to 5.19% from 5.29%…  This is just a delayed reaction the low bond yields.. but it just goes to show that the Banks continue their pattern of reacting slowing to lowering rates but move like Formula 1 race car to raise rates..

Of course, Posted Mortgage Rates really don’t mean much as the Wholesale Market or Broker Market deals with the true rates.. And Fixed rates dropped late last week to their lowest levels ever. … 5 year fixed rates are now at around 3.49%… with some Lenders even offering 3.39%…  WOW!

Watch for Fixed rates to move upward slightly as the Bond yield is now high enough to warrant an increase…

How will the high $Canadian dollar affect mortgage rates?

The Canadian dollar is just about at par with the U.S. dollar…  The BMO Economist sums it up well when he says “Generally speaking, from a stronger currency, consumers win and producers lose.”  As quoted in the Vancouver Sun.

And a high Canadian dollar means the Bank of Canada is less likely to increase the Target Rate which affects Variable Rates…  Any move by the Bank of Canada upwards will only drive the Canadian dollar higher…
A high Canadian dollar hurts our exports as they become more expensive for other countries to buy…  and we will probably see more cross border shopping as our strong $CAD will have more buying power…
Bottom line is that Variable Rates appear to be safe for now… enjoy the low rates…

 

Mortgage Rate Forecast in Canada

Here’s a recent article forecasting low rates that appeared in The Globe and Mail. The article points to Scotiabank’s Economist as saying “the economy has lost considerable momentum.”

Scotiabank is also forecasting  the Bank of Canada to keep the Target Rate or the Overnight Rate flat until the 3rd quarter of 2011.   This means the Variable rate should remain a good option with rates between 2.25% to 2.30%.

Current Bond yields are at 1.94% as of today…. this means the fixed rate spread is 1.65%.. this is above the normal 1.25% to 1.40%…

Fixed rates are priced closely to the Bond market but indirectly by the Bank of Canada’s actions… we are seeing 5 year fixed rates (the benchmark for fixed rates) hovering at 3.59% to 3.69%… and they could still go lower…

Enjoy the low rates… borrow wisely!

More speculation that interest rates will remain low

We’re starting to see more evidence that the recovery is not going as well as the Bank of Canada first thought.   Inflation has dipped slightly, even with the HST.

CIBC Chief Economist, Avery Shenfeld, says we are beyond the ‘Great Depression of 2008-09 but we are in the ‘Great Disappointment’ of  a sub-par recovery.   He’s forecasting for interest rates to remain flat until the spring of next year, followed by only gradual increases thereafter.

Great news for anyone that has a mortgage…

Bank hikes are questioned by the media

Just can’t leave this one alone…

The Globe and Mail ran a great article about the recent mortgage rate hikes by the Big Banks…..Seems like more of us are questioning the latest round of fixed rate increases….

The article gave some great stats that I wanted to share… First, we should point out that Fixed rates are affected by the Bond Market for the most part but Banks also raise money through GICs… Variable rates are affected by the Bank of Canada Key Lending Rate…. with that in mind…. here are the stats from the article….

10 YEAR AVERAGE…

  • 5 yr Bond 4.05%
  • Big Bank 5 yr posted fixed rate 6.75%
  • Big Bank 5 yr GIC 3.31%

THIS WEEK’S NUMBERS…

  • 5 yr Bond 3.02%
  • Big Bank 5 yr posted fixed rate 6.25%
  • Big Bank 5 yr GIC 2% to 2.1%

Has to make you wonder…?

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