Most Canadian interest rates ended 2012 not far from where they began. That’s due, in part, to no rate changes by the Bank of Canada.
Likewise, investors found little economic justification to move long-term bond yields in 2012. (Bond yields influence fixed mortgage rates.) The result was that prime rate and 5-year mortgage rates essentially stayed put.
Here’s a look at how various other rates and publicly traded mortgage companies fared in 2012:
The rate that underlies all others in Canada is the overnight target. It has now been stuck at 1.00% for a record 847 straight days.
Further up the yield curve we have the 5-year government bond. In 2012, it posted its smallest annual yield change in five years.
| Indicator | Year End | 2012 Chg |
| BoC Overnight Rate | 1.00% | No Chg |
| Prime Rate | 3.00% | No Chg |
| Discount Variable Rates1 | 2.65% | -15 bps |
| 5yr Posted Rate | 5.24% | -5 bps |
| 5yr Discounted Rate1 | 2.99% | -20 bps |
| 5yr Gov’t Bond Yield | 1.38% | +11 bps |
| 5yr GIC2 | 2.05% | +20 bps |
| 30-day Banker’s Accept. | 1.15% | +3 bps |
| 90-day Banker’s Accept. | 1.19% | +3 bps |
Below are some common mortgage spreads. Additional discounting led to tighter margins in 2012 and we expect more of the same in 2013 (but possibly to a lesser degree).
| Spread | Y/E (bps) |
2012 Chg |
| 5yr Posted – 5yr Bond | 386 | -16 |
| 5yr Discounted – 5yr Bond1 | 161 | -31 |
| 5yr Discounted – 5yr GIC2 | 94 | -40 |
| Discount Variable – 3Mo BA | 146 | -18 |
| Prime – 1 Month BA | 185 | -3 |
| Prime – 3 Month BA | 181 | -3 |
And finally, here’s a look at the performance of companies that make the majority of their revenue in the mortgage business.
| Company | Share Price |
2012 %Chg |
Annual Dividend |
| Counsel Corp | $0.96 | +47% | — |
| Equitable Group | $32.65 | +30% | $0.56 |
| Firm Capital | $13.61 | +3% | $0.94 |
| First National | $18.80 | +7% | $1.30 |
| Genworth MI | $22.59 | +10% | $1.28 |
| Home Capital | $59.07 | +20% | $1.04 |
| MCAN Mtg Corp | $14.01 | +4% | $1.12 |
| Timbercreek MIC | $10.16 | -3% | $0.76 |
| Xceed Mortgage | $1.55 | +58% | — |
As this table suggests, there weren’t many losers in the lending business this year. Let’s see what happens in 2013 with a possibly weaker housing market, escalating mortgage competition and the modest risk of a rate hike.
1 Discounted mortgage rates reflect estimates taken from lender rate sheets as of December 30, 2011 and December 31, 2012.
2 RBC’s 5-year non-redeemable GIC is used as a proxy for GIC rates. In reality, some lenders have to pay notably more on their GICs than RBC.
Rob McLister, CMT
Last modified: April 28, 2014
For someone who wants to take a flyer, does anyone have an opinion of which of these penny stocks would do better? Counsel Corp or Xceed?
Hi Rob, where/how can one find prevailing 30-day Banker’s and 90-day Banker’s Accept. rates?