By just how much is yet to be seen!
It has been quite the summer in the Canadian mortgage world. We have seen rates go from the 2.79% range up now to the 3.69% range for fixed 5 year mortgages. That is quite the increase. A lot of Canadians were sitting on the fence to see just how low rates would go and when they started rising it caused a lot of Canadians to make the leap they have been waiting for and purchase before their pre-approvals elapsed. With that having been said, if you do look at the history of Canadian mortgage rates, even at 3.69% for 5 years, we are at a time of low rates. If you do find the house that you have been dreaming for, please do not let the rate be the main thing holding you back. Remember you home is where you live and being happy is one of the largest investments in your life.
A major reason that rates went up over the summer is because of investors starting to pull money of out the “safer” Government of Canada bonds thus increasing the 5 year yields. The 5 year Government of Canada bond yield is a major factor in determining the fixed rate mortgage rate. They did this because for the first time in a long time investor fears of sovereign default and stock market crashes temporarily went away.
I read many articles all the time in many publications and for most the summer I still did not find many encouraging signs in the US financial news. Their QE easing is not ready to fully taper off and we have not seen the larger, consistent full-time employment growth. Also, the debt ceiling in the United States continues to climb and the representatives will have to vote, yet again, to increase the ceiling. If this does not happen then we are looking to many global problems as well as them not being able to keep federal programs going.
Over the past two weeks, the bond yields have decreased by 24 basis points to 1.88% as of today. There have been no corrections to the 5 year rate yet, they usually come a few weeks later.
I still have not seen enough positive news in Canada indicating a rise in the Bank of Canada lending rate of 3%. The variable minus 0.4% is still the most popular option at this time with my clients depending on their situation
Helping clients get the best advice is my ultimate goal. I love what I do and if anyone wants to sit down and discuss these trends in person or on Google Hangouts, I am totally up for that! Email me at nick@mortgageinottawa.com or call me at 613-294-4475
