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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.
