New 1-Year Fixed Rate: Lowest Since 2016

1-year fixed rates lowest since 2016

—The Mortgage Report: June 22—

  • Just the Latest Head-Turning Rate: What would a week be without a new low in mortgage rates? The latest term to wear the low-rate crown is the 1-year fixed, thanks to a new promo available through deep-discount brokers. Priced at 1.69%, it’s the cheapest effective rate on a 12-month mortgage since 2016. It’s also officially the lowest rate we’re tracking in Canada. Of course, people don’t usually line up for 1-year terms. Most prefer to avoid the hassle and minor expense of renewing in 12 months. But, for those who want financing to fill the gap until aggressive variable-rate discounts return, a 1-year fits the bill. (For background: Variable-rate discounts were prime – 1.00% and better as of early March. They’ve since deteriorated to prime – 0.70%, at best.) This deal has strings attached, however. It applies only to default-insured purchases and insurable purchases with 35% or more equity. If you’re interested, here are all the best 1-year fixed rate offers on the market.

  • Tiff Speaks: Freshman BoC Governor Tiff Macklem made his first in-public speech today. Here were some takeaways for mortgage consumers (the Spy’s comments in italics):
    • “If, as we expect, supply is restored more quickly than demand, this could lead to a large gap between the two, putting a lot of downward pressure on inflation. Rate Impact: Bearish
    • “Some central banks have taken their policy rates below zero. We feel that bringing that rate into negative territory could lead to distortions in the behaviour of financial institutions.” Rate Impact: Minimal
    • “The Bank has committed to buying at least $5 billion of Canadian government bonds a week until the recovery is well underway.” Rate Impact: Bearish, For Now
    • Quantitative easing can…send a signal that our policy interest rate is likely to remain low for a long period.” It’s sending that signal as we speak.
    • “The pandemic is likely to inflict some lasting damage to demand and supply.” Rate Impact: Bearish Longer-term
  • Real Estate Supply Ahead: RBC: “The delay in spring listings will likely boost supply during the summer at a time when homebuyer demand will still be soft—albeit recovering,” wrote RBC last week. “The eventual winding down of financial support programs is also poised to bring more supply to market later this year.”
  • Quotable: “If you think that the economy did hit bottom in April, a rate hike in two years … is a plausible outcome I think”— Andrew Kelvin, chief Canada strategist at TD Securities, via Reuters



9 Comments

  • J says:

    So…… the consensus is to choose a 5yr variable rate as oppose to fixed rate?

    Based on “bearish” statements by Freshman BoC Governor Tiff Macklem

    I have 2 options 1.79% variable or 1.99%fixed mortgage rate.

    I am thinking variable?

  • Waiting for a mortgage says:

    So my mortgage renewal is coming up later this year and was almost certain I’d be picking a variable rate again. But with fixeds falling so much, I’m having a change of heart.

    Is there any consensus or forecast as to just how low fixed rates can go? I’m honestly shocked to be seeing rates under 2%!

    • The Spy says:

      Hi Waiting for a Mortgage,

      Forecasts are out the window but it’s possible 5yr bond yields could drop to/below/close-to zero. If that happens, aggressive lenders could theoretically drop 5yr fixed rates to 1.65% or less +/- 15-20 basis points.

  • Robbo says:

    RBC just offered me 2.44% on a 4 year fixed, or 2.54% on 5 year fixed for my mortgage renewal. Not terrible, but I was hoping for sub 2.4% on the 5 year. 🙁

    • The Spy says:

      Hi Robbo, If you’re well qualified those are unexceptional rates for sure, especially given the big bank penalty if you break/refi the term early.

  • Sim says:

    Hi
    I renew mortgage in Td bank .4 years 2.14. Fixed.

  • Robbo says:

    Spyguy, I didn’t accept 2.54% from RBC and ended getting 2.39%! Whoop!

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