Latest Bank of Canada Rate Announcement
The Bank of Canada left the target for the Overnight Rate unchanged at 1.75% this week. Banks will leave their prime rate at 3.95% ( except for TD, which is slightly higher ), variable rates and Helocs will remain the same. The Bank sees a slowing or flattening of Canadian and Global Economic output through the rest of the year. Variable rates should stay the same the rest of the year.
Five-year mortgage rates react to the Five-Year Benchmark Bond yield. Through the first quarter of 2019, the yield has been decreasing on the benchmark bond and mortgage rates have dropped. We have seen mortgage rates decrease by ½ to ¾% this spring, getting back close to 3%. Some of the decrease is due to banks accepting lower spreads to retain some market share, some of the decrease is due to the bond trading lower. It is unlikely Banks will continue to lend at unusually low spreads between the bond and the mortgage rate. Another factor is the Government of Canada, through the Department of Finance and OSFI has mandated higher Capital Reserve Requirements for mortgage lenders. In order to meet these requirements mortgage lenders, need to put money aside. That will come out of higher spreads. Expect five-year mortgage rates to trend higher the rest of the year.
Expect Five-year mortgage rates to act independently of the Overnight Rate.
For those folks who like five-year fixed they have a window to protect the current low rates with a pre-approval. Many lenders will provide a 120- day rate hold, mortgage rates will likely be higher in the fall. You can help your prospective buyer get lower payments locked in if they act now.
The best security is to take advantage of our opportunities.
Have a good week.