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Fixed Rates Quietly Roll Back at RBC

Falling-5-year fixed-mortgage-ratesTrend-setting RBC has cut its 1- to 10-year fixed rates by 10-15 basis points. Its posted 5-year fixed has dropped back to 5.39%.

There was no press release, suggesting the nation’s biggest lender didn’t want to publicize it.

Just nine days ago, RBC led the major banks up to 5.54% on the benchmark 5-year fixed. Fortunately, a few smaller lenders chose not to follow its lead.

Since then, government yields (upon which fixed rates are based) have drifted lower. Now, the banks will have to retrace their steps.

random-mortgage-ratesMany are probably wondering how long 5-year rates will stay this low. Your guess would be as good as anyone’s. The bond market has looked like a heart rate monitor, so predicting is futile.

The only thing rate watchers can do is monitor yields. Barring unforeseen impacts on spreads, discounted 5-year fixed rates will probably stick around this level or below until the 5-year yield exceeds roughly 2.35% (+/- about five basis points). That’s the level where 5-year rates rose last time, and the point at which 5-year margins will start getting tight.

That information, of course, is irrelevant unless you’re a customer or broker timing a rate hold in the very short term.

Rob McLister, CMT