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Are Canadian Mortgage Rates Headed Down?


A reassessment of future rate moves has been carried out by the Bank of Canada in the aftermath of the US banking crisis. Before this collapse, the rates were supposed to see a quarter-point hike but due to the revised circumstances, there is a high probability of a quarter point decline at the Bank of Canada's meeting which is scheduled for April 12. Bond yields have taken a slump as Canada's 5-year bond yield, which influences the fixed mortgage rates, saw a downward trend as it was down more than 30 basis points and retesting its lows for this year. So what does all this imply for the layman? Those looking for mortgages with lower fixed rate mortgages may be getting some good news soon but we will have to wait and watch.

You may now wonder how this situation would affect the variable rate mortgages. Variable-rate mortgages get affected by short-term borrowing costs. As of now the BoC overnight rate affects the variable rate and not the yields. When the key interest rate changes, the variable rate borrowers get affected by the change. Experts feel that in the coming few months, borrowers will be looking at an overnight rate that is 0.50 points less than the current rate. This would be a mighty change from the 0.25-point increase the market had expected last week.

Drop in yields: Since the current inflation is 3x of the targeted rate, a stimulus of any kind can send it spiraling and that won't be the best for the central bank's plan of action as it will make the recent rate hikes inconsequential.

It remains to be seen if the rate cuts would be temporary or have a lasting nature and if they will let the real estate market breathe a bit. What is certain is that currently, the housing market s headed for low rates in mortgages that are both yield driven as well as overnight rate-driven. For rate cuts to be made possible, inflation needs to cool down and a hot economy doesn't help either.

If you have any questions or queries about bank rates, mortgages, or related topics, or if you want to discuss the impact of the current economic scenario on your mortgages, do write to us at LendX Financial in Brampton, Greater Toronto Area.

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