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Rate Watch

mortgage-interest-rates If you’re a well qualified mortgage shopper hunting for a fixed rate, you’re probably pretty happy right now. 

5-year bond yields (the basis for 5-year fixed mortgages) hit another record low today:  1.52%.

In keeping with the drop in yields, we’ve been seeing a lot more lenders cut their fixed rates.  The very best 5-year fixed rates are now lower than 80% of variable rates at the moment.  That doesn’t happen too often.  (Note to lenders:  Good luck selling prime + 1% variables)

Interestingly, despite bond yields dropping almost 4/10% in the last four weeks, the big banks are keeping their posted rates abnormally high.  Instead of lowering them, banks are talking up their “discounts" off posted rates.  That’s made posted rates almost useless as an indicator for most people.  (Seriously. Does anyone give any weight to a bank’s posted rates nowadays?)

Regarding variable rates, we’ve seen no rate drops (increased discounts) lately. 

Meanwhile, 30-day bankers’ acceptance (BA) yields–which often lead variable-rates–hit a record low of their own on Tuesday:  1.08%.  That’s down 1/2% in the last four weeks—the same amount that the market expects the Bank of Canada to cut on January 20.  Derivatives traders are betting accordingly.  They’re now pricing in a “100%” chance of a 1/2% rate cut in five days, and a 73% chance of a 3/4% cut.  (Source: CEP)