Advertisement
Some investors might look at their portfolios, but Canadians getting a mortgage (or renewing one) should keep an eye on fixed mortgage rates. Here’s why.
When markets drop like they did on Monday, you may not immediately think of the impact on mortgage rates. We’ve been relying on the Bank of Canada to nudge rates lower, namely for variable mortgages. But fixed mortgages got a news headline-worthy update today, thanks to bonds, which are reacting to yesterday’s global stock sell-off.
Bond yields have a “positive correlation” with fixed mortgage rates. That means when bond yields go up, so do fixed-rate mortgages, and vice versa. And since Canadian five-year government bond yields have dropped to 2.9%, as of Tuesday, mortgage rates are expected to come down, too.
Bonds are a form of debt security. Governments and corporations issue bonds to borrow money from investors. The amount borrowed is referred to as the bond’s face value or par value.
Interest is paid on the face value to reward investors for lending their money. The rate may be fixed—constant over the duration of the bond—or variable, changing over time in response to changes in a benchmark interest rate such as the prime rate.
Bonds are commonly referred to as fixed-income securities regardless of whether their interest rates are fixed or variable.
Read “What are bonds?” from the MoneySense Glossary.
According to Ratehub.ca (Ratehub Inc. owns both Ratehub.ca and MoneySense), fixed mortgage rates are on their way down.
“Bond markets have dropped in response to yesterday’s massive stock sell-off, and are now at 2.97%, a low not seen since June 2023, and also marking a 20-basis point drop in the span of a week,” says mortgage expert Penelope Graham of Ratehub.ca. “That will certainly prompt additional discounts for fixed mortgage rates, on top of the lower rates we’ve seen hit the market in recent weeks.”
Bond yields have been trickling down for a bit now. With the recent Bank of Canada (BoC) interest rate cuts on June 5 and July 24, yields have hovered around 3.3%, which hinted at a drop in fixed mortgage rates. And yesterday’s investor sell-off indicated lack of confidence from investors. So, where do mortgage rates sit?
“Right now, the lowest insured five-year fixed mortgage rate is 4.29%, which is the lowest a five-year term has been since last May,” says Graham. “With further decreases expected, it’s a good idea for mortgage shoppers and renewers to look into their rate hold options, which would guarantee them today’s lows for up to 120 days.”
Check this table* to see how mortgage rates are reacting.
As for the market, some investors are relieved to see stock prices drop, namely those of technology companies, including the Magnificent 7, which have had a mixed bag of earnings this quarter. It’s not only made fixed mortgages, but also some sought-after stocks, more affordable.
Affiliate (monetized) links can sometimes result in a payment to MoneySense (owned by Ratehub Inc.), which helps our website stay free to our users. If a link has an asterisk (*) or is labelled as “Featured,” it is an affiliate link. If a link is labelled as “Sponsored,” it is a paid placement, which may or may not have an affiliate link. Our editorial content will never be influenced by these links. We are committed to looking at all available products in the market. Where a product ranks in our article, and whether or not it’s included in the first place, is never driven by compensation. For more details, read our MoneySense Monetization policy.
Share this article Share on Facebook Share on Twitter Share on Linkedin Share on Reddit Share on Email
Reverse mortgages do the job of freeing up income for house-rich, cash-poor Canadian seniors. But their terms are often...
An Ontario law came into effect last year, designed to add transparency to the home-bidding process. Has it changed...
Many parents loan or gift money to their adult children for real estate purchases. Here are the legal and...
Should you “invest” in a cottage? And if you do, what happens when you sell it, give it away...
Sponsored By
EQ Bank
Is there a tax exemption for capital gains? No, but find out how to allocate your principal residence exemption...
Jill's late husband left her a cottage. What happens if she transfers ownership to her stepchildren?
With planning and the right documents, the capital gains tax owing on a family cottage can be lowered. Here...
