Robert McLister·
Mortgage Rate Trends
·

Bond Yields Approaching Key Lows

Falling-Bond-Yields People shopping for a fixed-rate mortgage can do the happy dance.  Government bond yields keep plunging, and that’s pulling down fixed mortgage rates.

  • The 5-year yield (a barometer of 5-year fixed mortgage pricing) has broken through key 4-month support levels. 
  • The 2-year yield has given up almost all of it’s massive October run-up
  • The 1-year yield is approaching it’s all-time low of 0.43%.

We’ve already seen several lenders cut rates, and the best rates for 1- to 10-year terms will likely further in the short term.

Variable rates remain unchanged.

Robert McLister
Robert McLister is one of Canada’s best-known mortgage experts, a mortgage columnist for The Globe and Mail, and Founder of mortgage broker intelliMortgage Inc., RateSpy.com, a website comparing Canada's best mortgage rates and Mortgage Editor of RATESDOTCA.
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17 Comments

  1. This sounds like a dangerous game the banks are playing. If any inflation creeps into the picture rate will definitely spike. I suppose this is a bearish indicator by the banks and suggests they believe we are in for a slow and painful recovery if not a return to recession.

    Reply

  2. This is nothing to do with a “dangerous game” being played by the banks … or any bearish indicator.
    The yields on these bonds are determined in the marketplace for Canadian government bonds, which is highly liquid. The fact that the yields have been dropping steadily this month means there is a lot of demand in the market. The banks’ decision to lower rates is based on the lower yields … they maintain their spread (profit margin), but they lower their rates in an attempt to get more business.

    Reply

  3. I’m planning on renewing my mortgage today with a 5 year fixed. My bank dropped their rates on Nov 20th, based on your report should I wait another few days to see if they drop again.

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  4. Today yields dropped even more! Now the 5-year is at 2.41% and the 2-year is at 1.15%.
    The banks really should be dropping their rates again TODAY. I mean, two-year yields are down 60 bps since last month and fixed mortgages rates have only come down 20 bps.
    Five-year yields are down 40 bps from last month and fixed mortgage raetes have only come down 15 bps. We need more.

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  5. I notice that the banks always seem very quick to change rates when the bond rates are rising but very slow when they reverse in the other direction.

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  7. Hi Shannon: Depending on your situation, it probably wouldn’t hurt to wait a week before committing.
    Hi Dan: Lender spreads have widened so advertised fixed rates should come down more in the short-term. (Not sure what will happen with posted rates)
    Hi Phillip: That’s a good observation. The banks were hoping you wouldn’t notice. :)
    Rob

    Reply

  8. Rob,
    In your opinion, does the fact that yields have fallen lately mean that banks will already give lower mortgage rates (as in a wider spread off posted rates) without actually lowering posted rates?
    Or will mortgage rates only come down when posted rates are lowered?

    Reply

  9. Five-year rates are now at 2.38%. Down 20 bps since the last posted rate drop last week. And down 50 bps from the Oct 15th peak.

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  11. isn’t it ironic now to see rates coming right back down again – something that almost ALL the mortgage brokers and market commentators said would NOT happen just a couple of months ago.
    I thought then that the rally in bond yields and thus mortgage rates wouldnt last but trying to suggest that argument a couple of months ago was like talking to a brick wall.
    Nice to see for once that the average Joe can be proved right and it would be good for everyone to remember when they read article after article warning them that rates are about to rise sharply, that they can in fact go the reverse and stay flat for YEARS or even dip further. World economies are not going to recover for a LONG time from this current recession / depression and its unlikely in my opinion that mortgages rates have any reason to rise significantly in the next 2 to 3 years.
    Lets watch and see :)

    Reply

  12. It is not ironic at all Al.
    Rates are random. Anyone who predicted rates would fall back are not right. They are lucky.
    Your prediction that rates will stay low for years shows that you don’t understand the concepts of luck and random markets.

    Reply

  13. Al,
    I agree with you. Sure, prediction isn’t guaranteed, but comments by ‘experts’ do affect the mindset of many customers. {May I dare say, sometimes the comments are intended to affect the mindset !]
    Greg:
    If it is such a random process then why do we listen to economists, and why are we even at this site. We expects the ‘experts’ to know better.

    Reply

  14. It is not ironic at all Al.
    Rates are random. Anyone who predicted rates would fall back are not right. They are lucky.
    Your prediction that rates will stay low for years shows that you don’t understand the concepts of luck and random markets.

    Reply

  15. isn’t it ironic now to see rates coming right back down again – something that almost ALL the mortgage brokers and market commentators said would NOT happen just a couple of months ago.
    I thought then that the rally in bond yields and thus mortgage rates wouldnt last but trying to suggest that argument a couple of months ago was like talking to a brick wall.

    Reply

  17. Mass respect Commentator dude. It was a totally amazing call the way you said rates would stay low like that. How did you do it guy?? I mean, how do you predict what can’t be predicted?? You got some special skills bro! Ya!

    Reply

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