Mortgage MemoFunny how bond yields are going down, but mortgage rates have hardly moved? Banks are taking some profits before things heat up for the spring market. We’ve had a 50 point drop in bond rates (these are what mortgage rates are based on) but mortgages have inched down slightly – around 10 points with most lenders.

I can predict that fixed rates will drop a bit more in the upcoming weeks as we enter the spring markets.  That’s assuming wage pressures don’t cause a change in direction for rates.

The next Bank of Canada (BOC) announcement on March 6th is expected to remain flat, and likely into the last half of 2019.  But the BOC are carefully watching inflation and wage pressures, along with the impact of low oil prices. The low prices are expected to drag on the economy, but wage pressures can trigger concerns once they start moving up in this tight labour market. So many variables to watch… can almost be a part time job doing this nowadays.

Household debt levels are still a huge concern and have a wide impact across the economy so any changes to rates are very measured right now.  The BOC does not want to choke off growth in the economy by collapsing household budgets with higher debt payments.

Then there are variable rates.

Banks are reducing spreads on these mortgages, as they are more expensive to fund. They are losing some appeal to borrowers as they don’t have the same big discounts from prime they had last spring market when we were offering them at prime less 1%. That’s still available if you’re a CMHC mortgage and using a broker (like me).  But the better bank variable rates are prime less .50% – big difference and when you look at 5 year fixed rates at 3.69%, that spread in rates is very small – 3.69% fixed versus 3.45% variable. Talk to your broker, not your banker, to find you the best rates and options as there are many that the banks don’t offer.