Canada’s five-year government yield closed at yet another seven-and-a-half-year high Thursday. That’s made lending more expensive, and in turn, inspired over 85 Canadian lenders to hike fixed mortgage rates in the last week.
What’s behind It
With most U.S.-Canadian trade uncertainty out of the way, a hot U.S. economy, and oil near a four-year high, consumers and businesses are feeling more confident about spending money.
That’s got the market worried. More spending usually means more inflation pressure and inflation is the enemy if you’re rooting for low rates. It makes bonds worth less, which drives up rates since bond prices and rates are inversely related.
This pop in rates has downright spooked mortgage shoppers. Lenders and brokers are reporting sizable upticks in mortgage inquiries this week, particularly for five-year fixed rates.
It’s not too late
As of market close on Thursday, you can still unearth five-year fixed rates like this, possibly even lower:
· 3.19 per cent if default insured with less than 20 per cent equity
· 3.39 per cent if default insured with 20 per cent equity or more
· 3.54 per cent if uninsured
But they’re disappearing quick. By next week this time, the lowest five-fixed offers could be at least 0.10 percentage points higher. That’s not exactly a tragedy but it does amount to about $900 more interest on a $200,000 mortgage.
Keep in mind, most rates are higher than those above, so you need to shop online and/or pit lenders and brokers against each other. Also, to get these deals you must be well qualified and mortgaging an owner-occupied home.
So far, the big boys (RBC, TD, Scotia, etc.) haven’t budged their posted five-year rates. If they do, people carrying lots of debt relative to income will find it harder to get approved because higher posted rates make the government’s stress test tougher.
The takeaway from all this? If you need a fixed-rate mortgage in the next 120 days, protect yourself and lock one down this week.