Variable Rates on the Rise

Several lenders have been cutting their variable mortgage rate discounts in the last few days.  It's happening because their cost of funds is rising.  In the last six days, 30-day bankers' acceptance yields (a proxy for variable-rate lending costs) are up over 1/4%. 

Yields have been driven by concerns about the US government's newly hatched bank rescue plan and soaring commodities prices.  Oil, for example, had its biggest 1-day gain ever today.  So much for commodity-driven inflation dying down.

The rate increases may be short-term only though--that is, if economists like Merrill Lynch's David Wolf are right.  Wolf expects coming economic slowness and is calling for a 1% rate cut by the Bank of Canada over the next year.  (Bloomberg)

Despite the recent increases, variable mortgage rates are still at least 1% lower than fixed rates at the moment.  So if you're shopping for a mortgage in the next 120 days, get your approval (or pre-approval) sooner than later.  That covers your behind if discounts get squeezed further by the time you close.