Cracks in Real Estate: Home sales have plunged. No secret there. But new data from HouseSigma gives us a hint of how much, at least in the Greater Toronto Area. Raw year-over-year sales data shows that during the first three weeks of April, GTA home sales have nosedived from 11,777 to just 4,027, down roughly 66%. And properties for sale...
Never before has our government been able to borrow 5-year money so cheaply. With oil in crisis mode, Canada’s benchmark 5-year bond closed at a record low yield of 0.419% on Thursday, according to Bloomberg. Bond yields remain a driving force for fixed rates, even with all the risk and volatility in the market. The reason: numerous other mortgage benchmarks...
Oil Bloodbath: Crude posted its largest price decline in history today, down 300% in the May futures contract. How is it possible to fall more than 100%? Oil futures traded below $0 a barrel for the first time in history. People weren’t even willing to take a barrel of oil (for May delivery) for free. The June contract was down...
Crude Unreality: Oil dove to its cheapest level since 2002 on Friday, closing at a staggeringly low $18.27 a barrel (WTI). Three months ago, the lowest analyst forecast for 2020 was $50! Given how important the black stuff is for Canada’s economy, its collapse should add downward pressure to bond yields—which are a leading indicator of fixed mortgage rates. Oil...
Record Broken: Canada’s 5-year bond yield moves fixed mortgage rates and it closed at another all-time low today. That coincides with a roughly three-week low in risk/liquidity premiums. Together, these two factors are driving fixed mortgage rates lower, with numerous lenders trimming rates 5-15 bps this week. More Hope: “With a vaccine more than likely out of reach for this...
Hopefully Not Reality: Despite the government’s relief plan, including mortgage payment deferrals—1 in 10 (9%) of mortgagors say they won’t be able to pay their mortgage in three months or less (Source: DART & maru/BLUE Survey). Few in the industry expect anywhere near 9% defaults, but the numbers we do get may surprise people. Back in the 1980s, prime mortgage...
Rate Conversions: Now Over-rated: Today’s best variable rates give borrowers a half-point head start versus a 5-year fixed. If one assumes the latest widely-held rate forecasts are correct (see below), prime – 0.35% or better variables still have a projected edge based on interest cost alone. And many are still willing to make that bet despite rate discounts being 50+...
Stock Losses Cut in Half: In another hint that the worst may be over in the COVID crisis, one of the most-watched stock indices in the world—the S&P 500—has retraced 50% of it’s massive COVID-related decline. Although, with far uglier economic data ahead many are calling this a shorting opportunity. We won’t pretend to know if they’re right but here’s...
Variable Discounts Start Improving: This week, we reported that falling risk premiums are helping to lower costs for mortgage lenders. And it’s starting to pay off. In the last few days, we’ve seen various lenders start to drop 5-year fixed rates 10 bps or so, as well as cut variable rates (i.e., improve their discounts) by 10 to 20 bps....
Good News for Variables: There’s hope for better variable rates yet. The “prime – BA spread” is widening (getting bigger). That means banks may soon be making more money on variable mortgages, which eventually means they’ll offer better discounts off prime rate (for new borrowers). With the Prime-BA spread back to 1.66%, the pressure to raise variable rates has subsided....
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