Dave Larock in Interest Rate Update, Mortgages and Finances
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Last week was relatively quiet for mortgage-related news.
The latest U.S. inflation data (for July) showed that overall U.S. inflation increased by 0.1% on a year-over-year basis, which was less than the 0.2% rise the consensus had been expecting. Bluntly put, this latest report isn’t likely to change anyone’s pre-existing view of what the U.S. Federal Reserve might do next.
In today’s post I’ll reflect on some of the forces that will affect Canadian mortgage rates in future by highlighting five key questions that borrowers should be focused on as we look toward the fall market (in order of importance):
Of course, the questions above assume that President Trump and Kim Jong Un don’t decide to start a war that replaces the fall market with a nuclear winter instead. But that outcome is beyond my pay grade and not one I’m inclined to speculate on.
Five-year Government of Canada (GoC) bond yields fell seven basis points last week, closing at 1.47% on Friday. Five-year fixed-rate mortgages are still available at rates as low as 2.64%, and at rates as low as 2.79% for low-ratio buyers, depending on the size of their down payment and the purchase price of the property. Meanwhile, borrowers who are looking to refinance can find five-year fixed rates in the 3.04% to 3.09% range.
Five-year variable-rate mortgage discounts remain largely unchanged and are still available at rates as low as prime minus 0.90% (2.05% today) for high-ratio buyers, and at rates as low as prime minus 0.75% (2.20% today) for low-ratio buyers, again depending on the size of their down payment and the purchase price of the property. Borrowers who are looking to refinance should be able to find five-year variable rates around the prime minus 0.45% to 0.70% range, which works out to between 2.25% and 2.50% using today’s prime rate of 2.95%.
The Bottom Line: GoC bond yields have levelled off of late and the BoC hasn’t indicated that it plans to raise its policy rate at its next meeting in September. Those factors suggest that both our fixed and variable mortgage rates should stay at their current levels over the near term and the answer to the five questions outline above will go a long way toward determining which way they go after that.
David Larock is an independent mortgage broker and industry insider specializing in helping clients purchase, refinance or renew their mortgages. David's posts appear weekly on this blog, Move Smartly, and on his own blog: integratedmortgageplanners.com/blog Email Dave