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Mortgage Spreads Stay Wide

Canadian mortgage spreads have risen even further since we last reported they were at multi-year highs in November.  Most industry pros we talk to, however, feel it’s an aberration that should correct itself.  The question is, when?  It could take three months, or it could take a year.  (Click chart to enlarge it)

Mortgage-Spreads-20080106
Note: The spread above represents the average 5-year posted mortgage rate minus the 5-year bond yield.  It shows how much investors are demanding above safe government returns to lend money to homeowners.  The market clearly thinks Canadian mortgages are getting riskier.

See our related story from November.

(Data courtesy of the Bank of Canada)