Categories for Mortgage Rate Trends

Rates Lift Off on Trade Truce Hopes

Bond yields erupted Friday for the biggest two-day gain since 2011. Canada’s 5-year yield—which is closely watched for its influence on fixed mortgage rates—closed at its highest point since July. This comes after the Trumpinator heralded a potential U.S./China trade truce. The trade war, now a year and a half old, has pounded mortgage rates on the assumption that weaker...

How People Choose Between Fixed & Variable Rates

As much as academics advise against it, people (consciously or subconsciously) try to predict interest rates before choosing a mortgage. But, interestingly, they don’t look very far into the future when making these forecasts. “…Households are forward-looking over relatively short periods of time,” research shows. A 2015 international study by Cristian Badarinza, John Y. Campbell and Tarun Ramadorai found that “the...

Could the Stress Test Exacerbate the Credit Card Problem?

Mortgage debt has been in the crosshairs of federal regulators for years. But considerably less attention has been paid recently to unsecured debt—i.e. credit card—balances for which have been growing at an alarming pace. And with the 2016/2018 mortgage stress tests crimping the amount homeowners can borrow at low rates, it’s likely that even more Canadians will be forced to...

Fed Cuts. Canadian Rates Barely Move

Canadian mortgage rates follow U.S. rates like spring follows winter. So today’s U.S. Federal Reserve rate cut is most relevant indeed. The Fed chopped the floor for its key target rate by 25 bps today to 1.75%—the same as the Bank of Canada. It’s the second cut in 49 days, but only the second cut since 2008. As usual, the...

Rates Hit 2-Month High + Other Rate Nuggets

Bond Bloodbath It was a grisly Friday the 13th in the bond market. Investors ran from bonds like they were being chased by Jason Voorhees with a chainsaw. U.S. 5-year bonds crashed (yields soared 12 bps), which drove Canada’s 5-year to a two-month high. For non-bondy types, bond selling drives up rates since the two move inversely. Catalysts for the carnage...

Competitors Attack Banks on Mortgage Penalties

If there’s one thing the major banks wish would go away, it’s talk about their fixed-rate mortgage penalties. Competitors constantly use accounts of huge bank penalties to sell against the banks, and the media picks up on it. Expect more of this as mortgage penalties approach record highs. In the last few months, we’ve seen non-bank lenders increasingly market their...

Fixed Mortgage Rates Falling Faster Than Bond Yields

Any creditworthy mortgage shopper is practically guaranteed to get a better rate today than they could have at the start of the year. Fixed mortgage rates have been on a ski slope this year, sliding to two-year lows this month. If you’re wondering how far they’ve tumbled, here’s a look. These were the best widely available 5-year fixed rates, as...

Don’t Trust Prime Rate

Remember the days of: VCRs Paper maps Beepers Being able to rely on banks lowering prime rate when the Bank of Canada cut its overnight rate? Well, times change. And so has the pressure on banks to grow earnings each quarter. Falling rates and a flattening yield curve have squeezed bank profitability, leading them to resort to unconventional earnings tactics....

Canadian Rates Plunge to Two-Year Low

President Trump has figured out how to get his way and force more rate cuts out of the Federal Reserve: Create trade panic. Trade wars—exacerbated last week by Trump’s latest gambit—could cost the global economy up to $1.2 trillion and pressure the Fed to cut rates more than expected. North American yield curves inverted further on this news, suggesting higher probability of...

Another Major Bank Cuts its 5-year Posted Rate

A fourth major bank has cut its posted 5-year fixed rate today. This time it’s BMO. The move comes four long months after the 100+ basis-point collapse in 5-year bond yields. Such a delay in reducing posted rates after large, market-wide rate drops is unusual historically speaking, as we’ve explained previously. See the chart below for more perspective. BMO’s cut today has implications...