Fixed Rates Trend Below 5%

Many big lenders are now offering 5-year fixed rates at just under 5.00%.  In fact, 4.99% seems to be a pretty popular number nowadays. 

By contrast, most 5-year variables are still at prime + 1.00% (or 4.50%).

bond-yields There are exceptions of course.  For example, there are certain deeply discounted fixed rates out there that we haven’t seen since May 2007. 

This drop in fixed rates follows a steep fall in bond yields, which are down considerably in the last month or two.  The 5-year bond closed today at just 2.11%–another multi-decade low.

If you’re hunting for a fixed rate, find a good mortgage planner to do the legwork.  Not only is it free, but most brokers have access to unpublished rate specials you won’t find elsewhere.  Just make sure to find a planner who shops all lenders–including each of the big 5 banks. A few of the big banks are currently on a market-share kick and have good promotions running.

Chart Source:  Bank of Canada

  1. Edgy investors trying to avoid losses and seeking shelter in bonds with guaranteed returns or little / reduced chance of losses.

  2. Aren’t there certain big 5 banks that mortgage planners do not have access to. Your quote” Just make sure to find a planner who shops all lenders–including each of the big 5 banks ” Is there mortgage planners that have access to all the big 5.

  3. Well, below 5%, this is good news for people who haven’t fixed their rate yet. I wonder if it will be worth it for people (including me) with variable discount to lock in now. I have the feeling that it will still be a little bit lower, but even if it didn’t, I have the feeling that I will come out ahead being in variable discount anyway. It is at least 2% difference!

  4. Hi Ashley,
    That’s a great question. If by “have access” you mean “get paid by” then no. But that doesn’t mean a planner can’t recommend a non-broker product if it’s best solution for the client. We do it all the time.

  5. would any bank apologists please come out of the PR woodwork to explain how the banks can refuse to lower their rates and hold prime 0.25 above where it should be?
    Fixed income rates in every market, in every time horizon has fallen dramatically – stepped through an empty elevator shaft more like it.
    Why are banks refusing to pass on the lower cost?

  6. Babak – Lenders don’t borrow from the Bank of Canada when handing out money for mortages. They borrow from financial instruments which typically yield a higher return during normal economic conditions. This makes more profit for the lender and a lower borrowing rate for the borrower…remember the Prime – 0.9% days??
    I’ve heard from many sources that lenders earn virtually nothing on variable rate mortgages right now. There is lots of pressure for them to lower their rate but at the end of the day, they’re not going to take a loss.

  7. My husband and I bought our second home a month ago and locked into a five-year fixed rate at 5.7%. Now we are realizing that was a pretty bad decision (made too quickly in a busy time!), since the variable rates are so low. Do we have any options here, or would the penalty of changing be too high as we are at the beginning of our term? Are we stuck?

  8. Hi Kyle,
    You are probably in good shape with your variable right now. No one knows what tomorrow will bring but there appears to be nothing on the horizon that will push up fixed rates significantly in the near-term.

  9. TD Bank is offering me 4.5% (4 year fixed), is this a good rate.
    Don’t have much equity in the house and worry about getting laid off — so no stomach for the variable rates.

  10. Thank you for posting that Mark, I’m always on the search for info about fixed rates, particularly at TD, but I’m willing to take my mortgage elsewhere for better rates.
    Does ANYONE know why all the banks have lower FOUR year fixed rates compared to 3 and 5 yr fixed rates? What’s happening in 2012 that makes all the banks encourage us to take 4 yrs fixed mortgages when most people traditionally want 5 yr fixed? I’m worried about sky high rates in 2012, maybe a way to make back money lost during these lower rate times. Tell me that’s nuts.

  11. 4 year money is generally cheaper than 5 year money. Thus the lower rates. 2012 is a presidential election year which some say keeps rates low. In reality it’s a crock. The economy in 4 years will determine where rates will be.

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