Daily Mortgage Report – April 14

Mortgage rates drop to multi-week lows
  • Falling Back to Earth: Fixed mortgage rates are at multi-week lows. In the last week, multiple big lenders have cut 5 to 15+ bps. The key reasons:
    • rates are descending in the fixed-income market (where lenders fund most of their fixed-rate mortgages), and
    • credit spreads are narrowing (meaning lenders are paying smaller risk and liquidity premiums to investors to obtain mortgage capital). As just one example, the cost for big banks to raise 5-year money in the bond market—as compared to the Government of Canada—is down roughly 85 bps from the peak on March 23.
  • Better Variable Discounts to Come: There’s no way to know when lenders will once again widely offer prime – 0.50% or better. But they will. One leading indicator of floating-rate discounts, 3-month bankers’ acceptance yields, have improved 53 bps month-to-date. Barring the COVID-19 crisis worsening beyond expectations, that improvement should soon translate into better variable discounts for new borrowers.
  • BoC in Neutral: The Bank of Canada makes its next rate announcement at 10 a.m. ET Wednesday and virtually no mainstream economists expect it to alter rates.
  • Rate Bearish: “The three critical sectors for the Canadian economy are housing, banking and energy. All three face significant pressure.”—Veritas Research, via The Globe and Mail.
  • HELOCs During COVID: Can you get one? Should you get one? Rates.ca Story
  • Stocks Think the Worst is Over: The stock market is one of the better predictors of the economy. It’s notable then that since the 1930s, among all bear markets where stocks rallied 50% from the lows (like we’ve seen this month), in not one case did the U.S. stock market retest its lows (Source: CNBC).
  • Slippery Crude: Oil keeps sliding despite Monday’s historic production cut. It’s now lingering near the psychologically imperative $20 level, seemingly waiting to test $19 or less. The longer it closes below $20, the more bearish it’ll be for Canada’s economy…and interest rates.



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