Last-Minute Fixed Rate Deals

Mortgage-rate-increasesYesterday was a huge day for pre-approval submissions.  Borrowers were  locking in rates by the thousands.

For those still in need of a rate-hold, the remaining mortgage “deals” are mostly from non-bank lenders.

As of this writing:

  • The Big 5 have all raised 5-year “special offer” rates to 4.54%, or just above.
  • A diminishing number of non-bank lenders are still under 4% on a standard 5-year fixed mortgage. (It’s difficult to say how long that will last…probably not long.)

Interestingly, not only have 5-year fixed mortgages become more pricey, but shorter terms have also sprung up.

If you haven’t looked lately, check out where the 2-year bond is trading. It’s been over a year since the 2-year last exploded like this.  That’s propelling shorter-term fixed rates—like 2- and 3-year mortgages—higher.

The exception to these rate increases are variable and 1-year terms, which have stayed put and are averaging prime and 2.49% respectively.

  1. I know that fixed rates can’t be predicted, just like prime rate but what are your thoughts, do you think that fixed rates will go back down or keep climbing?

  2. No one can predict what mortgage rates will do from here. It is not unusual for rates to rise and fall within a matter of months. Banks know this and they also know that they can “force” many investors to lock in by raising rates. Banks, therefore, may raise rates strictly out of self-service. I find mortgage brokers are encouraging people to lock in now as if it’s the last chance–do brokers get paid more to lock a client in? If so, there is a potential conflict of interest.

  3. Hi Ashley: You’re absolutely right that fixed rates are usually random. Over the long-term, however, they tend to correlate with broad economic cycles. If one is to believe that Canada’s economy is recovering, and that yields are bouncing from a long-term bottom, then it is reasonable to use last Friday’s bond action as a sign that rates may be entering a longer-term uptrend. Depending on your personal situation, recent events may make locking in a reasonable decision. There’s not a lot more one can say without knowing about your personal circumstances.
    Tom: Agree with your first two sentences. Not sure I’d agree that banks or brokers are out to generate profit by scaring people into locking in. I would submit that most mortgage professionals are advising their clients in good faith, given that rate risk levels have gone up.
    Per your question, if clients are in a variable mortgage, banks and brokers do not generally get paid more when the client converts to a fixed rate. There are exceptions but they are not sufficient to compel widespread conflicts of interest.
    Kwan: Glad we could help!

  4. Hi,
    I just buy a house with a 5 years variable mortgage closed at (prime + 0%). After reading your comment, I am wondering if I’d better took a fixed rate.
    Does it mean I am toasted now ?
    As an estimation, when will the prime rate reach 3.90% ??

  5. Waltereo,
    No one knows for sure, I am just guessing that it may take 2-3 years to get to 4-4.50% for prime, but again, in 6 months to a year, we may see good variable prime minus products, as we recently saw 3 years at prime minus .10, you can also check if you can convert your mortgage to prime minus with minimum penalty later on or not, you may want to check if your lender is offering some discount right now and get a chance to get prime minus product at this point as well.

  6. Hi All,
    For what its worth I don’t think rates are going to go up any time soon. Basically, if we raise and the US doesn’t our currency will appreciate, making our exports to the US more expensive. If that happens, Ontario and Quebec will lose any recent economic momentum and before you know it, all the pressure on rates will be downward again.
    In short, I don’t think Canada will do much with rates until the US Fed makes a move and that isn’t happening for a while. I think this is much ado about nothing, but then, I agree with others that predicting what rates will do is a bit of a mugs game.

  7. If there might be good variable prime minus products in near future then its worth going with variable open now which is available at prime +.5 to prime +.75.

  8. I think Rob has mentioned a strategy for people loving prime minus product, possibly they can take 1 year fix and then convert to prime minus once they see some good discounts, js, who is offering prime +.5 on open, it is good to know someone is.

  9. Ted, Bonds directly influence fixed rates and they move in ADVANCE of prime rate. Factors that drive up bond yields affect the Bank of Canada’s policy decisions. Bank of Canada policy decisions then dictate prime rate.

  10. Bond rates influence fixed rate mortgage rates. Bond rates are influenced by the prime rate, but not governed by it.
    Bond rates have been going up. So are interest rates on fixed mortgages. What else is new?

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