Bank of Canada chief, Mark Carney, repeated his pledge to keep rates low, saying today:
“Conditional on the outlook for inflation, the Bank expects the policy rate to remain at its current level until the end of the second quarter of 2010…”
That “inflation” caveat means there is a chance rates will rise beforehand, but few are brave enough to predict it. Nonetheless, Carney stressed that things can change.
Carney also said people shouldn’t get overly excited about an economic recovery just yet. He noted lots of uncertainty on the horizon, including the Canadian dollar. It’s virtually unprecedented 2-month rise (see chart) is offsetting much of the government’s economic stimulus.
In conjunction with this news, Canada’s 5-year bond yield promptly bounced off of technical resistance and closed near the day’s lows, at 2.75%. It will be interesting to see if it can get through the 3% level. Perhaps we’ll have a respite from rising mortgage rates for a little while. Or perhaps we’re wishful thinkers.
_______________________________________________________
Sidebar: For those unaware, the BoC sets Canada’s overnight target rate, which guides prime rate. That, in turn, influences variable mortgage rates.
Fixed mortgage rates, on the other hand, are driven primarily by bond yields.
Last modified: April 28, 2014
Is anybody still under 4% as of today?
What do think of doing a 1yr term, and then 8 mths from now, get preapproval for 5yr term? Will rates have shot up higher by then? Any predictions?
Thanks
Love your site!!!
I presently have a 3 year open variable -0.5 (approximately a year into) and have a 120 day rate hold on a 3.69 5 year fixed. I plan on locking in at the end of the hold. From what little I know is that rates have not been this low for some time. How long can this last? Why wouldn’t you lock in as long as possible this is very cheap money.
HSBC still at 3.85%
Where are you seeing that? HSBC’s website says 4.25%, which is average at best.
Wow, it was 3.85% this morning and I checked again before posting. That was a big jump!
I am in a closed variable paying 4.4%, and my contract is for prime -0.85%, so my effective rate right now is 1.40% (or something like that). Bond rates rising make me uneasy, but the advancement I am making on my mortgage right now is hard to pass up, especially if the overnight rate stays at 25 pts.
I guess it just is what it is..
Hi Paulo,
You’re way ahead of the game at 1.40%. Only in a minority of cases does it make sense for someone with a heavily discounted variable to give it up. That’s a very general statement of course and each case is different.
If you used a mortgage planner for your mortgage, they should be able to run a hypothetical rate comparison. That will give you a sense for what would happen to you if rates rise in the next few years.
Cheers,
-rob
Having Carney say he won’t raise rates unless there is inflation is like my thermostat saying it won’t run the furnace unless it gets cold.