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Yields Down. Rates, Not So Much

Canada’s 5-year bond yield closed near a 3-week low today, settling at 2.43%.  That’s down from its June 10 high of 2.81%.

While there’s been a noticeable dip in yields, there hasn’t been much reduction in 5-year fixed mortgage rates (which track yields).  At the most, we’ve seen a few non-bank lenders drop 5-year rates by 0.10% lately.  The Big 5 banks have not lowered advertised rates at all.

One lender sent an email today suggesting that banks have changed their focus from aggregating clients to profitability. Given the banks just went through a vicious market share war, they may be less inclined to discount rates now with only four months to hit their year-end income targets.

The lender went on to say: “There may be some movement soon, but banks are ensuring bond prices stay consistent before they make a move.”