Variable Rates on the Rise

Mortgage-Rates 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.

  1. About 10 days ago, I got a promotional offer from a bank for p-0.75 open variable. I met with the banker, and she said the offer would last until the end of month. I booked a formal appointment with her this Friday for all the paper work.
    Then yesterday, she called and told me the offer was no more! I was quite upset.
    My current bank still manages to offer me p-0.5 though.

  2. @FSBOGeek
    Same story here; got an offer for P-0.6 for an open a few days ago, and now it went up by 10 points to P-0.5.
    Looks like that’s the best out there for an open variable (or is it?).

  3. TD gave us P-0.75 (as an exception) for 5-year variable
    I thought that was great rate, until someone on RFD said TD gave him P-0.96 for < $250K mortgage (VERY VERY unlikely, almost impossible) I am inquiring about details of course..

  4. Jonathan
    I would be careful. IMO Red Flag Deals is filled with hucksters trying to lure you to call them for a mortgage. Almost every time I’ve called one of the “brokers” or banks on that site they look at me like I’m retarded when I ask them for the rate I saw mentioned. There are people on RFD right now claiming to have rates that haven’t existed for over a year. Going there to research mortgages is usually a complete waste of time. It’s almost total BS.

  5. OK, this is way off topic but I don’t know who else to ask.
    Does the CMHC engage in a lot of derivatives trading against it’s portfolio of mortgage loans?
    What I am wondering about is if the CMHC is anything like Fannie and Freddie in the US which started out offering mortgage insurance, but which kind of morphed into “the biggest levered hedge funds the world has ever seen”.
    I’m rather hoping the CMHC is as boring as they present themselves to be. A big blowout in the derivatives market could have a big impact on the CMHC regardless of what the housing market in Canada does.

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