Market Interest Rates are Tumbling
What it does mean for your mortgage is this: Variable rate and home equity line of credit (HELOC) clients will see rates remain unchanged; Fixed rates aren’t directly correlated to the Target for Overnight rate, rather, bond markets, which are at very low yields, holding fixed rate mortgages 1%+ lower today than January 2019.
The Government of Canada 5-year yields have dropped 1.85%, now at 1.15% which is the primary reason we have watched mortgage interest rates drop correspondingly in the last 8 months, which is one of many benchmarks for pricing mortgages in Canada. What makes this even more interesting is variable rate mortgages are actually higher than most fixed rates on the market today.
What’s not consistent with all this decline in yields and mortgage rates is the qualifying rate, which still sits at 5.19%, down from 5.34%. This is still a significant barrier for clients wishing to refinance or shop their mortgages to other lender for competitive rates and most especially, for consumers still seeking home ownership for the first time. Let’s hope the “stress rate” or “qualifying rate” gets some attention to bring us back to a level playing field in the rate world.
“In sum, Canada’s economy is operating close to potential and inflation is on target. However, escalating trade conflicts and related uncertainty are taking a toll on the global and Canadian economies,” the central bank said in its statement. “In this context, the current degree of monetary policy stimulus remains appropriate.”Bank of Canada Decision – September 4, 2019
The decision by the Bank of Canada is essentially driven by global instability fueled by trade wars and other economic instability. The Bank expects the economy in the second half of the year to slow from the 3.7% growth in the second-quarter.