Tracking Government of Canada (GoC) bond yields is important because they help determine where fixed rates are headed. Since the beginning of March, 5-year GoC bond yields have been steadily climbing. This important because it gives us an idea of where lenders will likely take their current 5-year fixed rates. This month, lenders have been engaged in a second mortgage pricing war since BMO re-introduced the 2.99% 5-year fixed rate. This has kept Canadian 5-year fixed rates at record lows over the past few weeks as BMO’s competitors looked to match. But one has to wonder, if 5-year bond yields continue to rise (and eat into lender profit margins), at what point will lenders start to take away their big discounts?
The first mortgage pricing war at the beginning of the year came to an end abruptly when one of the Big Five, RBC, decided to pull its promotional 2.99% 4-year fixed rate early. Other lenders followed suit. Initially, RBC’s offering was intended to last until the end of February until the bank cut the promotion a whole three weeks early, stating: “Our long-term funding costs have gone up considerably due to global economic concerns and, while we have held off in passing on these rate changes to our clients, it is now necessary for us to increase this mortgage rate” (via Bloomberg).
Will the rise in 5-year GoC bond yields force lenders to cancel their big discounts on 5-year fixed rates early? Last week was the first time in March that 5-year bond yields didn’t finish higher by the end of the week.
5-year Government of Canada bond Yields:
Where are Canada Mortgage Rates this week?
A 5-year history of weekly 5-year fixed mortgage rates and 5-year variable mortgage rates
Canadian Mortgage Rates 2012
The only change from a major lender we saw last week was CIBC lowering their 3-yr fixed rate from 3.18% down to 3.08%. The best 3-year fixed rate on Ratehub.ca is 2.69%
Note: This is simply a small sample size and does not represent the entire market. It does, however, offer some useful insight.