The Government of Canada benchmark 5 year bond is currently yielding 1.40%. It’s current position is in the middle of the previous 12 month range where the high hit 1.74% and low hit 1.06%. Its future path is expected to stay within the same range over the next several months. While bond yields represent mortgage lending costs it’s not the only factor determining 5 year fixed mortgage rates.
Competitive pressures can drive lenders to sharpen their pencils and offer lower mortgage rates despite bond yields. Similarly you may see lenders sitting on the side lines with high mortgage rates if their quotas are filled. The current slowdown in the credit market has many lenders looking for new sources of revenue.
The big 5 banks will release first-quarter earnings data this week and new data suggests a drop in consumer lending. Regulatory filings show that loan growth for the country’s biggest banks slowed to just 0.60% in November and December. The drop is a clear result of tighter mortgage rules.
With massive loan and mortgage portfolios these behemoth banks need to write massive amounts of new loans just to offset the amount of pay-offs and pay-downs and maintain their portfolios.
This spring market will prove interesting as our mortgage lenders grow increasingly hungry for fewer deals. The biggest carrot they can offer of course is lower mortgage rates. You can expect to see continued low 5 year fixed mortgage rates over the next few months with lenders hovering around the 3.00% threshold. It’s a buyers’ market when it comes to borrowing, making this a great time to get in the market or consolidate debts.