There should be some be some relief soon for those facing mortgage renewals, as three of Canada’s big six banks have slashed their fixed mortgage rates. And while the Bank of Canada’s rate cut on June 5 plays a role, the primary factor influencing the cuts was a drop in five-year bond yields of 36% last week, reports Canadian Mortgage Trends (CMT). “While none of the big banks made any major rate moves at that time, this week saw BMO, CIBC and RBC all deliver widespread rate reductions to their posted special rates across all mortgage terms,” says CMT. “The rate drops averaged around 10 to 15 basis points (bps) but in some cases amounted to cuts in excess of 20 bps (.20%), according to data from MortgageLogic.news.” “It’s great news for people who are renewing,” said Ron Butler of Butler Mortgage in a social media post. CMT says a survey by Mortgage Professional’s Canada on June 11 found 76% of mortgage holders looking at renewals over the next 12 months were anxious about facing higher rates, which for many, is now off the table, says Butler. “Rates are going from mostly all 5%-plus, to mostly rates in the 4%-range,” he said, adding most three- and five-year terms will be available for les than 5%, but shorter terms (one- to two-year fixed) will continue to be priced slightly higher. “The rate reductions follow a continued decline in Canadian bond yields, which typically lead fixed mortgage rate pricing,” per CMT, quoting Bruno Valko, vice-president of National Sales at RMG Mortgages saying the reductions coincide with similar moves in the US also reacting to the latest lower-than-expected inflation results there and in Canada. “As the 10-year US Treasury yield goes, the five-year Government of Canada yield follows,” he said. Mortage broker Ryan Sims believes the latest round of rate cuts will start to open up some differences rates between lenders. “Everyone has different risk levels, different exposures and different profit targets on their mortgage book,” Sims told CMT. “So, I think, for the first time in a while, we will see a nice spread between the same rate, lender to lender.” Expect some lenders to focus on insurable mortgages, while others will compete on uninsurable products, pursuing “fatter margins,” said Sims. “It will be interesting to see where the chips fall on this, but I think finally lenders will have a different spread, which we have not seen for a while,” he said. While being hesitant in speculating where rates could go in the near future, Sims suggests there could possibly be continued rate declines over the next 30 to 60 days, with an eventual pull-back in response to economic data, such as a rise in inflation. “Basically, like waves on the ocean, we go up and we go down, but we are range-bound at the floor of about 3.05% and a ceiling around 3.75% for the five-year bond yield,” he said. “Until we see definitive data one way or the other to break out of the range, we hold this up and down pattern.”
There should be some be some relief soon for those facing mortgage renewals, as three of Canada’s big six banks have slashed their fixed mortgage rates. And while the Bank of Canada’s rate cut on June 5 plays a role, the primary factor influencing the cuts was a drop in five-year bond yields of 36% last week, reports Canadian Mortgage Trends (CMT). “While none of the big banks made any major rate moves at that time, this week saw BMO, CIBC and RBC all deliver widespread rate reductions to their posted special rates across all mortgage terms,” says CMT. “The rate drops averaged around 10 to 15 basis points (bps) but in some cases amounted to cuts in excess of 20 bps (.20%), according to data from MortgageLogic.news.” “It’s great news for people who are renewing,” said Ron Butler of Butler Mortgage in a social media post. CMT says a survey by Mortgage Professional’s Canada on June 11 found 76% of mortgage holders looking at renewals over the next 12 months were anxious about facing higher rates, which for many, is now off the table, says Butler. “Rates are going from mostly all 5%-plus, to mostly rates in the 4%-range,” he said, adding most three- and five-year terms will be available for les than 5%, but shorter terms (one- to two-year fixed) will continue to be priced slightly higher. “The rate reductions follow a continued decline in Canadian bond yields, which typically lead fixed mortgage rate pricing,” per CMT, quoting Bruno Valko, vice-president of National Sales at RMG Mortgages saying the reductions coincide with similar moves in the US also reacting to the latest lower-than-expected inflation results there and in Canada. “As the 10-year US Treasury yield goes, the five-year Government of Canada yield follows,” he said. Mortage broker Ryan Sims believes the latest round of rate cuts will start to open up some differences rates between lenders. “Everyone has different risk levels, different exposures and different profit targets on their mortgage book,” Sims told CMT. “So, I think, for the first time in a while, we will see a nice spread between the same rate, lender to lender.” Expect some lenders to focus on insurable mortgages, while others will compete on uninsurable products, pursuing “fatter margins,” said Sims. “It will be interesting to see where the chips fall on this, but I think finally lenders will have a different spread, which we have not seen for a while,” he said. While being hesitant in speculating where rates could go in the near future, Sims suggests there could possibly be continued rate declines over the next 30 to 60 days, with an eventual pull-back in response to economic data, such as a rise in inflation. “Basically, like waves on the ocean, we go up and we go down, but we are range-bound at the floor of about 3.05% and a ceiling around 3.75% for the five-year bond yield,” he said. “Until we see definitive data one way or the other to break out of the range, we hold this up and down pattern.”
