Latest From the Rate Trenches

Here’s the latest on mortgage rates following the maniacal once-or-twice-a-decade-type week we just had in the markets…

Where Mortgage Rates Landed

A quick look at this week’s major rate drops from the Big 6 banks:

Prime Rate

• Banks slashed their prime rates on Thursday from 3.95% to 3.45%—the most since the credit crisis. That story.

5-Year Fixed Rates

• Typical big-bank unpublished (a.k.a., “discretionary”) 5-year fixed rates fell this week to approximately 2.59% to 2.64%
  • Banks, in general, have chopped 5-year fixed rates anywhere from 20-35 basis points in the last 10 business days.
  • Canada’s 5-year swap rate, a good proxy for banks’ base funding cost on a 5-year fixed mortgage, fell a remarkable 56 bps in that same timeframe.
  • A few months ago, on January 1, typical big-bank five-year fixed rates were at 3.04%.

Variable Rates

• Typical big-bank unpublished (a.k.a., “discretionary”) 5-year variable rates plunged this week to approximately 2.60%
  • This drop essentially reflects the cut in prime rate.
  • A few months ago, on January 1, typical big-bank variable rates were at 3.20%.

Here are the latest big bank mortgage rates, but note, they may keep falling as we get new updates this week.

Where the Deals Are

Given that:

• banks were kind and passed through the full BoC rate cuts to variable-rate borrowers
• banks haven’t moved short-term fixed rates down enough
• variable rates are once again below 5-year fixed rates
• variables historically outperform 5-year fixed rates
• variables usually have lower penalties than 5-year fixed rates (but not always)
• at least 50-75 bps of further BoC rate cuts are priced into the market.

….variables are back in play.

The lowest variable rates being advertised are:

• 2.14% on high-ratio purchases and switches (source: multiple brokers)
• 2.19% on 65% LTV (or less) purchases and switches (source: intelliMortgage)
• 2.34% on a conventional purchase or lender switch (source: HSBC)
  • Note: HSBC has one of the best variable-rate features in the business. Its 5-year variables are fully open after three years. That flexibility lets you lock into the market’s very best 5-year fixed rates in three years, if necessary.
• 2.44% on all other deal types, including refinances (source: HSBC)

The lowest 5-year fixed rates being advertised are:

• 2.15% on high-ratio purchases (source: intelliMortgage)
• 2.19% on 65% LTV (or less) purchases and switches (source: intelliMortgage)
• 2.39% on all other deal types, including refinances (source: Tangerine)

Note: We saw an incredibly low 5-year fixed rate of 2.19% for purchases (any loan-to-value up to 95%) at Scotiabank eHOME, but these rates vary by customer, so not everyone will see this deal. Also, you need to create an account to see eHOME rates.

Reader Note: intelliMortgage Inc. is owned by Kanetix Ltd., which owns this website.