Fixed Rate Reversal?

Mortgage-Rates The Bank of Canada is on the inflation offensive and bond yields are rising.  It’s not the best environment if you’re hoping for fixed rate cuts.

The yield on the 5-year bond has catapulted 21 basis points (0.21%) in the last 24 hours.  It hasn’t jumped that much in over four years.  In fact, in 2549 trading days over the past 10 years, there’s been only eight other times the 5-year yield has closed this much higher.

Now we’re getting word that one of the biggest non-bank lenders will raise their fixed rates tomorrow.  We’ll have to wait and see if the commercial banks follow suit.  Hopefully they don’t but be prepared that they very well might.

If you’re in the market for a fixed mortgage, there are still a few lenders under 5% on a 5-year fixed.  Yet, a lot of borrowers are still out there waiting for rates to fall further.  If this is you, it may be time to ask yourself if it’s really worth holding out for an extra 1/4% or so. 

  1. I am locking in my 10 year rate at 5.80 TOOOODAY. Can’t stand the fact of more fluctuation. I’m a wimp when it comes to that!
    One question though – I’m in a condo now and obviously won’t be in here for 10 years. The mortgage is transferable to my next purchase (with a blended rate).
    Should I have opted for a lower term/rate, or should I stay where I’m at. 5.80 in my opinion is a great rate, but I wasn’t so sure if I should do the full 10 years.

  2. Thanks to the information from this website, I converted our variable rate mortgage with PC Financial on June 2nd and have 5.76% for a 9 year term amortized over 9 years. I have been waiting for the fixed rates to rise given the disparity between bond yields and fixed rates. I have also shared this with my colleagues, one of which also took the advice and locked her mortgage in as well.

  3. Just booked a 5 year 5.15% at 7:30pm at a previously scheduled mortgage meeting, thinking rates would have gone down maybe .25% after Boc meeting. Instead, I was thanking my lucky stars that less than an hour after it was announced that rates at CIBC then TD went up .5%, I was booking till 2013 after having a 4.9% from 2003.Good luck to all you variable types, hope you enjoy paying more every month that rates go up,up,, i’d rather lock in and throw away the key..

  4. Hi Webby: Depends totally on your individual circumstances. Variable rates and short terms are generally less expensive long-term, but 5.8% is only 1/4% to 1/2% above current 5-year discounted rates…not bad for 10-years of assurance.
    Hi Dan: Glad to help. At the end of the day, locking in is a personal decision because rate predictions are futile over the long haul. Nonetheless, I’m happy we could provide info. to help with your decision. Good luck!

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