With the Canadian economy forecast not looking well it looks like Canadian mortgage brokers are the beneficiaries of bond rates slipping.
In the past few weeks the fixed mortgage rates have been falling because yields on five-year bonds have been falling since the fall of 2018. This is what banks and lenders use as a landmark for themselves as they borrow on the bond market.
A 1.45 per cent yield on Government of Canada bond late in March was the first time that it went below 1.5 percent since mid-2017.
There's all kinds of technical forces, and it is not necessarily the case that tomorrow we'll have a recession," CIBC economist Benjamin Tal said in an interview.
"However, the yield curve slowing down is a clear signal … we have to listen to. We have a conflict between the stock market, which is more optimistic, and the bond market which is more pessimistic."
Simply put, bond yields are heading lower mainly because investors think the economy is looking dim, so they expect interest rates to start moving lower. This has been reflected in both the Bank of Canada’s stance on raising interest rates and lenders voluntarily lowering their 5-year fixed rates to as low as 2.84 per cent.
In 2018, general opinion was that the Bank of Canada would continue to moderately raise rates into 2019. Now that 2019 is here, however, the Bank hasn’t actually raised them. Sentiment among economists is that the Bank will keep rates the same for now, and they may even lower them.
Lower band rates are generally the sign that the economy is a standstill. On the other hand it’s great for people seeking mortgages.
For updated rates and mortgage information check out rateshop.ca for the current best mortgage rates.