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2013 – Year in Review

2013-Mortgage-ReviewFive-year rates of 2.99% or less were the talk of the market in 2013. That is, until the U.S. economy accelerated, taper threats spooked the bond market and yields soared one point in four months.

And climbing fixed rates weren’t the only thing making mortgages less accessible in 2013. The Finance Department decided to tighten its collar around housing even further. The goal: to brake housing’s momentum and reduce Ottawa’s exposure to mortgage risk.

Those and other headwinds marked an eventful 2013. Here’s a rundown of the year’s top stories, rate movements and mortgage-related stocks.




The foundation for most Canadian rates is the overnight target rate. It ended the year where it began, at 1.00%. The Bank of Canada hasn’t changed it for 1,213 straight days.

The most important benchmark for fixed-rate pricing is the 5-year government bond, and in 2013 we were reminded of how fast 5-year yields can climb. Its one-point move from May to August was enough to motivate thousands of Canadians to rush into the housing market, to avoid potentially higher rates later.

Indicator Year End 2013
BoC Overnight Rate 1.00% No Chg
Prime Rate 3.00% No Chg
Discount Variable Rates1 2.50% -15 bps
5yr Posted Rate 5.34% +10 bps
5yr Discounted Rate1 3.39% +40 bps
5yr Gov’t Bond Yield 1.96% +58 bps
5yr GIC2 2.08% +3 bps
30-day Bankers’ Acceptances 1.23% +8 bps
90-day Bankers’ Acceptances 1.27% +8 bps


Below are some notable mortgage spreads. The one to watch in 2013 was the fixed-variable spread. It widened more than half a point as fixed rates climbed and variable-rate discounts improved.

Spreads (Year-end) 2013
2013 Chg
5yr Posted – 5yr Bond 338 386 -48
5yr Discounted – 5yr Bond1 153 161 -8
5yr Discounted – 5yr GIC2 142 94 +48
Discount Variable – 3Mo BA 122 146 -24
Prime – 1 Month BA 177 185 -8
Prime – 3 Month BA 181 181 0
Fixed – Variable 89 34 +54


And finally, here’s a look at the performance of public companies that make the majority of their revenue in the mortgage business.

Company Share
Atrium MIC $10.84 -1% $0.80
Counsel Corp $2.40 +150%
Eclipse Resi. MIC  $7.81 -19% $0.60
Equitable Group $50.76 +55% $0.64
Firm Capital $12.20 -10% $0.94
First National $22.60 +20% $1.40
First National MIF $9.20 -8% $0.60
Genworth MI $36.63 +62% $1.40
Home Capital $80.93 +37% $1.12
MCAN Mtg Corp $13.00 -7% $1.12
ROI Cdn High Inc. $8.15 -14% $0.60
ROI Cdn Mtg Inc. $7.90 -17% $0.50
Timbercreek MIC $9.17 -10% $0.80
Trez Capital MIC $8.74 -10% $0.70
Trez Capital Sen MIC $8.78 -11% $0.50

Publicly traded mortgage investment corporations (MICs) took it on the chin this year. Their prices often move inversely to bond yields, and last year was no exception.

The all-star stocks included Counsel Corp. Genworth Canada, Equitable Group and Home Capital—all of which crushed the TSX’s 9.55% gain in 2013.

1 Discounted mortgage rates reflect estimates taken from the most competitive lenders’ rate sheets, as of December 31.

2 RBC’s 5-year non-redeemable GIC with monthly interest 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