Yields Catapult Higher

Fixed mortgage rates should tick higher next week–barring any economic surprises.

That’s because Canada’s 5-year government bond yield is up 18 basis points today, the most in almost five months. (Bond yields guide fixed-rate mortgage pricing.)

Bond-Yields-Mortgage-RatesThe jump in yields is, thanks to stronger-than-forecast U.S. employment data, a new June maturity as the 5-year benchmark, asset rotation into stocks, and the 20% increase in debt issuance announced in yesterday’s budget.

If you’re considering a fixed-mortgage rate hold, it may be wise to lock it in by Monday.

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Sidebar:  We have to wait another week for Canadian employment data. Usually it comes out the same day as U.S. data, but not this week.

  1. People that know me know that I never make predictions but this one is a certainty. This ride looks to have wheels on it.
    Long-term, fixed rate mortgages are going up probably 30 basis points on a 5yr fixed by early next week. lock-em down, right now people!

  2. Similar to how the bond market prices affect fixed rates what/where can information be consulted to determine if banks and other financial institutions will do with their discount rates?
    From what I can see the discount rate keeps continues to get larger. About a month ago some lenders were pushing Prime -.15 and now its Prime -.30 in some instances. How can one tell if the discount rate will be getting bigger?
    Not sure if it is worth the wait to see if the discounted rates get larger or to lock in on a fixed rate at today’s level.

  3. Good questoin Aaron.
    I just came from TD after seeing this article here. I have to decide by Monday if I want the 3.69 five year they are offering me to lock in the second smaller part of my HELOC. I locked in the first larger part last May for 3.65.
    Today they wouldn’t budge on the prime plus one for the HELOC variable so I’m being pushed to lock in for the 5 years.
    I’m thinking if the rates do go up by one percentage point in the summer but they start to allow descretion on the HELOC, let’s us say prime plus .5 I might regret.
    I think perhaps they are being ridgid on the HELOC variable rate because rates are so rock bottom, how can you argue with 3.25 for a variable anyway when it’s so flexible in the HELOC. But when it hits 4.25 they might relax a bit on it. I don’t know.
    I’m thinking prime can only go up so much…maximum 2% in the next few years so it’s going to be a close call where these things make a big difference.
    Thanks again to this website, it’s made me go in take action today. Now I have to decide!

  4. Heloc Thoughts:
    I’m in much the same boat as you and plan to go to the bank first thing monday and to talk about my options with my HELOC.
    One question you may be able to answer for me ahead of time: is that 3.65 rate lock simply that, or does it also mean fixed payments with limited prepayment etc (ie more like a mortgage). If I still had the same flexibility of my HELOC but simply locked into a slightly higher rate (I’m at 3.25% right now so 3.65% or even 4% isn’t that big a deal) I’d pick that option. I’m tired of waiting and wondering how much rates will go up and how fast….I remember when I didn’t care that much and it was great ;-)
    If anyone else has the answer I’d appreciate it as I could make up my mind and just walk in and tell them what I want.
    And I’ll echo your last sentiment too: thanks Rob for the great site. It’s been most helpful!

  5. Oliver,
    The part I’ve locked into my HELOC already is in the mortgage format. I too liked the benefit of having part of the mortgage not locked in and getting the 3.25 percent.
    If they’d give me a little less than the 3.25 on the variable I’d leave the second part of it there in case I decide to sell my other property, suddenly have cash on hand, and have the ability to pay it off.
    But when I think rates are for sure going up around the summer my lower rate evaporates and not only that I’m exposed to who knows what. Worse case scenario I think is 1.5 to 2 percent. So I’d be paying up to 5.25 in the variable part of my HELOC.
    So I lose the flexibily and grab the great rate of 3.69 or let it ride. I’ll probably grab the 3.69 Monday because even if I am suddenly able to pay it down, 3.69 is so cheap I could invest any other available money at close to that amount.
    So I’m going to go that way. I’ll be ticked though if after doing that and rates do go up TD or Scotia start being flexible and offer lower HELOC variable premiums.

  6. 3.65% is a fixed rate mortgage. It is not open like a HELOC.
    You cannot get a cheap fixed rate mortgage that is open. The only low cost open mortgages/HELOCs have variable rates unfortunately.

  7. True Vince, when I say I’m looking for a lower HELOC rate I was referring to the variable tied to prime. Right now it’s prime plus 1. If they gave me prime + .5 I might not lock in the part that is in variable.
    The 3.65 is what I pay on the locked in mortgage part and the 3.25 is therefore what I pay on variable.
    The 3.69 is the rate on Saturday TD gave me to lock in the part I now have in variable. Because they don’t offer a hold on a rate inside a HELOC they said I’d have till Monday.

  8. After reading my last post I think I sound like I’m confusing things.
    TD put a 225K lien on my house and said it was a HELOC product. Whatever they want to call it, the 225K is the total debt with them. Within that 225K they allowed me to lock in a conventional type mortgage at 3.65 for 190K last May. I left 35K in variable which has been prime +1.
    Now I’m looking at locking that 35K into a fixed 5year at the best they will give me which is 3.69. Ideally though I’d keep that 35K in variable if their premium above prime wasn’t so high.

  9. Variable rate discounts may drop as low as prime – 1/2% but that shouldn’t be your deciding factor. You are either best suited to a fixed or best suited to a variable. 2/10% difference in the rate should be meaningless in your decision.

  10. 20 bps could ordinarily be meaningless, but if someone is sitting right on the fence, and then gets an extra 0.2%, that could be enough to make the difference

  11. Well, I pulled the trigger and locked down 2/3 of my HELOC…..and what a load off of my mind! I think you’re right, David, regarding being someone who can ride a variable or not. I can….but only to a point. Dangling a large portion of my house on variable was just too much for me personally. The ratio is very much more comfortable now. I want rates to stay low, obviously, but they can go up too (a lot) and I won’t lose sleep.
    Once again I have to say thank you for this site and to all of you posters for helping me in this particular instance, and in the past. This site is a great resource.
    cheers
    Oliver

  12. locked in at 3.75% today 5 years with scotia, the variable was good but under 4% is a steal in my opinion. And if I get aggressive enough in 5 years I might have a bulk of this mortgage gone with little worry on refinance or to refinance at all!

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