Government bond yields have rebounded sharply since their November plunge. Discounted fixed mortgage rates should climb this week as a result. A few lenders have already raised rates in the last few business days.
The 5-year yield, which helps determine 5-year mortgage rates, is just 8 basis points below its 14 month closing high.
The 1-year yield has bounced in a similar fashion.
Stronger than expected economic news and ascending U.S. bond yields are driving Canada’s market.
No additional significant economic data is scheduled for release this week.
How much will the rates go up by?
I was looking at the past year and the spread between yields and the posted rates has ranged between 2.9%-3.1%. The yield is about 2.8% now. Would it be correct to assume the new posted rates will rise to about 5.7%-5.9%? (that would be an increase of about 0.2%-0.4% from todays posted rate, which is a lot IMHO)
When yields run up, posted rates don’t always follow. What does change is branch discretion. It may shrink. Branch discretion is the discount branches can give off posted rates.
Most non-bank lenders don’t have discretionary rates, so instead they must raise their actual discounted rates.
Any increases may be modest at this point unless yields run up further. In the last few days, there’s been a few lenders increase 0.05% to 0.10%. Nothing major. Most lenders haven’t moved.
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