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Bad News Is Good News For Borrowers

The bad news:  U.S. and Canadian employment numbers both disappointed. The story

The good news:  Bond yields fell today to their lowest point since April 2009, which means the fixed rate party continues.

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interest-rate-news What’s Next:

  • Very few analysts now expect an October 19 BoC rate hike
  • Discounted fixed rates may drift lower (perhaps 5-10 basis points in the next week, barring a rebound in yields).
  • Today’s news has minimal effect on variable mortgages, apart from prime staying put for a while. Variable rates have inched as low as prime – 0.85% for a no-frills (watch those no frills mortgage restrictions!).
  • We’ll see if the big banks throw us a bone and drop posted fixed rates. The Big 5 are operating on a fat 352 bps spread (between the posted 5-year rate and bond yields) but they’ve been reluctant to move since August 23rd’s cut to 5.39%.

Rate Commentary:

  • "The market had basically priced the Bank of Canada out (of further rate hikes). This won't do anything to change that.
        — Doug Porter, BMO economist (Reuters)
  • "This (employment) report is not disastrous. Certainly it supports the growing market participants' view out there that the Bank of Canada will take a pause on October 19."
        — Sebastien Lavoie, LBC economist (Reuters)
  • Economic growth should return to 2% by mid-2011, which would “give the Bank of Canada some justification in raising rates. But even then, we don’t see rates going up quickly.
        — Krishen Rangasamy, CIBC economist (Bloomberg)