As anticipated, the 5 year fixed mortgage rate has bounced around over the past month with little net movement. Best discounted mortgage rates have recently returned to the 3.29% level after some modest 0.10% to 0.20% increases.
These fluctuations are a direct result of pricing changes to 5 year Canadian bonds. Government bond yields have recently climbed on Canada’s growth prospects relative to other Group of Seven countries. The countries with the best overall growth prospects will attract more investment and hence drive up bond prices. Although Canada’s economic recovery has been modest, it is performing substantially better than the floundering US and European Nations. Due to the inverse relationship of bond yields to price, this upward price movement has driven down yields and subsequently, mortgage rates.
According to the Washington based commodity futures trading commission, futures traders increasingly bet that the Canadian dollar will gain on its US counterpart. This parallel indicator points towards a strong Canadian outlook and lowered Canadian bond yields. The resulting forecast for 5 year fixed mortgage rates is that they will remain at their current levels with some modest fluctuations over the next 6 months.