There was some slight movement with Government of Canada (GoC) bond yields last week. Both the 5-year and 10-year GoC benchmark bond yields finished 7 basis points higher to the end last week. These two GoC bond yields are important because they help drive where 5-year fixed and 10-year fixed mortgage rates will head. Typically, fixed rates will increase as bond yields increase. And the more 5-year and 10-year Government of Canada bond yields climb, the less likely lenders will keep both those rates at record lows.
“Actually, variable rates are generally less attractive right now compared to fixed rates.” – Kerri-Lynn McAllister in Macleans
Variable rates, although available below 3.00% through some brokers on Ratehub.ca, have fallen out of favour. The spread between both variable and fixed rates has been shrinking since late 2011. The difference between discounted 5-year fixed rates and discounted 5-year variable rates is only 0.34% (or 34 basis points). This is a much different story from last year’s full percentage point spread advantage in favour of the variable.
Last week, the Canadian mortgage industry was buzzing about the Canadian Mortgage and Housing Corporation (CMHC) reaching its $600 billion mortgage insurance cap. This means the CMHC is evaluating the portfolio of insurance it provides to different groups of borrowers. There has been some speculation there may be changes to come in regards to self-employed and New to Canada mortgages, which you can read more about here.
Where are Current Mortgage Rates this week?
A history of weekly 5-year fixed mortgage rates and 5-year variable mortgage rates
What mortgage products are Canadians buying?
The hot topic continues to be 10-year fixed rates as the rates continue to hover at record lows in 2012. According to a past Monday Mortgage Update, as of December 19th, the interest rate on 10-year fixed rates was 4.32%. Today, the rate has fallen an incredible 58 basis points to 3.74% since that point.
Also worth noting, 2-year fixed rates, which is the lowest rate on Ratehub.ca, at 2.59%, garnered lots of consumer attention last week.
Note: This is simply a small sample size and does not represent the entire market. It does, however, offer some useful insight.