5-Year Fixed Rates Drop Again

It’s almost becoming a weekly affair. RBC has cut its posted 5-year fixed rate again, to 5.39%.

That makes four 10-basis-point rate drops in the last month. 

RBC’s latest reduction took effect on Saturday. It was one of those stealth cuts to posted rates, with no press release.  (Although RBC did issue a release about lowering its discount rates.) 

Whatever the case, rates sure do fall slower than they climb.  Back in March we saw a 60 bps hike in one day. As of late, borrowers have had to wait patiently while fixed rates trickle lower inch by inch.

5-year-yields-vs-5-year-Fixed-RatesTheoretically, there’s still a little room for fixed rates to fall further. Despite 40 basis points of posted-rate cuts in the last month, spreads are healthy enough to warrant more discounting. But, keep an eye on bond yields.  If yields rebound higher from the consolidation* they’ve been forming, the party may end…for now.

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5-year bond yields have been trying to put in a bottom in the 2.15% to 2.20% range for the past 12 days.

  1. thats a fat spread… I think rates can drop another 30-50 basis points AND… we will have all time low fixed mortgage rates?
    and another spike in house prices… i hope not… really!

  2. Overall it is not a good sign. If mortgage rate goes down following bond yield then there is this fear of “construction market being propped by lower interest rate” This trend is not sustainable. Long term effect of this is not going to bring in good news.

  3. Thats why people shouldnt be frightened into signing long term fixed rate mortgages. It seems that people just do as the banks say and dont shop around enough. Go variable,save money , and you wont regret it.

  4. People have been saying that for the last year or two. The world economy still hasn’t recovered and the economy still needs lower rates to get people to spend their money on big ticket items such a s cars and houses . If the rates go up like people say they are then the economy will go backwards . The time is not right for huge rate hikes and I suspect they wont rise to any huge extent for the next two years at least.

  5. 5-yr bond yields hit 2.02%, and 5-yr swap spreads hit 1.98%, their lowest since May 14th/09, and only 66 bps points off their all-time low of 1.32% from Jan/09.
    Since they are down about 10 basis points on the day we should hope for the banks to catch up with another 10 bps rate cut … I’m sure CMT will keep us posted!

  6. CIBC lowered their 4 and 5 year rates 10 basis points to 5.04% and 5.39%(posted rates) respectively as well effective today. CIBC still has the best 7 year rate available at 4.35% (220 basis points off the posted rate.
    Al

  7. I agree, however, that it’s not overall good news. If the bond market is this negative, the prospect of sustained defaltion must be something that is at least possible (if not likely …)
    Hopefully, the 5 year bond yield doesn’t break down below 2%?

  8. Let’s hope it keeps falling!
    Why would we want it not to drop lower and lower?
    Lower yields mean lower mortgage rates, meaning lower monthly payments.
    In fact this should keep the Canadian housing market from taking a downturn.

  9. Trading hit 2.01 today. I maintain that this is *not* overall good news.
    Lower yields on bonds mean worsening economic predictions. I’d rather have a job and a reasonable mortgage rate than a low mortgage and no job … And falling asset values under a deflation spiral.
    The news out of the US is cause for concern: despite record low rates, no one there is buying houses …

  10. Chris, you’re missing the point.
    The tail doesn’t wag the dog, the dog wags the tail.
    If mortgage rates are down, it won’t cause economic problems … mortgage rates are down BECAUSE of economic problems.
    That’s why the Bank of Canada lowers interest rates when they’re concerned about the economy … because lower interest rates are a boost for the economy and jobs, etc …

  11. 5-year GoC bonds just hit 2.00% yield, their lowest of the year
    Mortgage rates definitely won’t be going up anytime soon, and maybe even inching down … I’ve seen 3.49% advertised, meaning 3.39% is probably even possible for 5 years (that would provide a 139 bps spread over GoC’s)

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