We have finally seen a bump up in interest rates. The 5 year government bond rate hit a low of about .60 in mid-September and is now pushing towards 1%. The lenders have reacted to this and we have seen the low rates of 2.59% on the 5 year fixed mortgage rate disappear. Some banks have raised their 5 year fixed rate to 2.99%, while there are a few lenders still offering 2.64% on high ratio mortgages. The banks have also been reducing their discount rate on their variable mortgages. Where there were some rates as low as prime -.80 they are now floating between -.30 to -.50. Since the Bank of Canada and the prime rate have not changed, why is the discount being reduced? Could it be that the lenders are concerned that the Bank of Canada could drop rates again in the near future?
With all the recent changes, what does the future hold? The European Central Bank (EBC) just cut its key interest rate to -0.3% and now we have the Bank of Canada talking about the possibility of the Bank rate dropping to 0% and the willingness to go negative to help spur on the Canadian economy. Negative interest rates are another whole topic.
So where are interest rates going? Reading the economic data is like looking down the road. The further down the road you look the less clear it becomes. Therefore, we must keep an eye on the road so to speak, to know what is best for our personal mortgage situation and if we should be making any changes to our current situation. This is one of many good reasons to have a mortgage adviser, as it is to have a financial adviser.
The current economic data tells us interest rates will remain low for some time to come. The 5-yr Canada Bond Rate has fluctuated in a range between 0.60% and 1.0% for the last year and currently is sitting at about 0.86%. We suspect we will be in this range for some time to come. Looking at the price of oil and commodities in general and the huge impact they have on the Canadian GDP does not bode well for the Canadian economy. That being the case, what is the best mortgage for you? Consult your Dominion Lending Centres mortgage professional on the options that best fit your situation.
If you come across clients that are looking for mortgage advice, we are happy to review anyone’s situation, even if they are just looking for information. We offer free mortgage reviews as many mortgage holders can better their situation by renewing early or positioning themselves to secure the best mortgage well before their mortgage comes due.
If there is ever anything we can do to help put you in a better financial situation please contact us at Dominion Lending Centres.
Thank you to my DLC colleague Kevin Bay for this article.