—The Mortgage Report: Aug. 25— Yes. The Question is: When? Most readers know that fixed mortgage rates follow bond yields. But it’s bond yields south of the border that are particularly influential for Canadian mortgage rates — given U.S. influence on our economy. To get to 1.49% on discounted 5-year fixed rates, we need a Canadian 5-year bond yield near...
One of the best short-term leading indicators of 5-year fixed mortgage rates is making a beeline towards a 2.5-year low. Canada’s 5-year swap rate is now just 1/10th of a percentage point away from this key threshold, which, if broken, will lead to further fixed-rate cuts. Banks routinely price fixed mortgages against swaps, which are interest rate derivatives used to...
Every December, we try to read the tea leaves and prognosticate what’s ahead for real estate lending. (See this year’s2020 mortgage predictions.) It’s always a fun exploit, and this year, unlike most, there’s a good shot that our calls go 5 for 5. One topic that remains a crap-shoot in 2020 is housing appreciation. Canada is entering the year with...
Central banks around the world have been cutting rates. But, so far, the Bank of Canada has avoided joining that club. One of its worries is that lower interest rates would reignite the mortgage and housing markets, adding to Canadians’ already toppy debt loads. Deputy BoC Governor Carolyn Wilkins reiterated these concerns in a speech yesterday. “You’ve heard us say...
People are constantly hoping to time the rate market, despite how ineffective it may be. For the brave souls who try, here’s some interestingresearch from the U.S. Federal Reserve. One of its economists,Claudia Sahm, has documented a pattern in unemployment data. In her Fed report, she writes, “…Comparing the three-month average [U.S.] unemployment rate to its low over the prior...
If you knew where inflation was headed, you’d have a great chance of knowing where mortgage rates were headed. The latter rises and falls with the former. That’s why so many people try to predict inflation. Among the many who think they know where it’s going: The 100 senior Canadian businesspeople surveyed by the Bank of Canada every quarter 2...
The Bank of Canada said today that it’ll keep coasting on rates. But the market isn’t so sure. Investors think our central bank may have to cut sooner than some expect. Here’s a summary of this morning’s decision: Rate Announcement:No change Overnight rate: Remains at1.75% Prime Rate: Remains at 3.95% Market Rate Forecast:One rate cut in 2020 BoC’s Headline Quote:...
The U.S. Federal Reserve and Bank of Canada seldom make rate announcements on the same day, but tomorrow will be an interesting exception. No one expects any fireworks, but if you believe market expectations, the Fed will cut its key rate 1/4 point while the BoC does a whole lot of nothing. If it all plays out accordingly, it’ll be...
As much as academics advise against it, people (consciously or subconsciously) try to predict interest rates before choosing a mortgage. But, interestingly, they don’t look very far into the future when making these forecasts. “…Households are forward-looking over relatively short periods of time,” research shows. A 2015 international study byCristian Badarinza, John Y. Campbell and Tarun Ramadorai found that “the...
Knowing the future wouldn’t help you pick the right mortgage. Unless you knew allthe future. Imagine a fantasyland case where it was 100% certain that all mortgage rates would be higher in five years. With that priceless information most people would take a 2.49% five-year fixed over a 2.59% one-year fixed. But initial rates and ending rates are only two...
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