RateSpy.com<\/a>.<\/p>\nThe five-year yield has climbed from 0.48% in February 2016 to 1.13% at the end of the year, which has helped push mortgage lending rates higher.<\/p>\n
Why the five-year bond? Because most mortgage terms are for five years and companies raise the money they lend by selling GICs, deposit notes and mortgage backed securities with a similar maturity.<\/p>\n
Variable mortgage rates, however, can be priced at the prime rate or at a discount to the prime rate, which is set by financial institutions. The discount is determined by a lender\u2019s short-term funding costs so the rate you pay can fluctuate throughout the term, says McLister.<\/p>\n
Government intervention<\/h3>\n
Last year, the Canadian government decided that it needed to do something to cool the hot housing market and ensure that Canadians aren\u2019t taking on more debt than they can handle.<\/p>\n
It instituted new insurance restrictions and bank capital requirements, including a ban on insurance for refinances, extended amortizations and $1 million plus properties. These changes are making it more expensive for lenders to securitize or hold mortgages on their balance sheets, says McLister. \u201cAnd that extra cost is being passed on to the consumer through higher rates,\u201d he says.<\/p>\n
As well, buyers must also now make a down payment of 20 percent or qualify for the Bank of Canada\u2019s posted five-year fixed rate, which is currently 4.64%.<\/p>\n
When taken together, these government rules \u201creduce competition for low-ratio mortgages,\u201d says McLister, which then causes rates to drift higher.<\/p>\n
The Trump effect<\/h3>\n
While Donald Trump\u2019s election has buoyed stock markets, it\u2019s also driven up long-bond rates in the States and in Canada \u2013\u00a0yields often climb here when rates in the U.S. rise. Bond markets are reacting to a potentially more inflationary environment under the new president.<\/p>\n
\u201cTrump is one of the most pro-growth presidents the U.S. economy has ever witnessed. Financial markets believe his tax cuts, infrastructure spending, deregulation and other policies are inflationary,\u201d says McLister. \u201cAnd when inflation expectations jump, bond yields rise.\u201d<\/p>\n
Since he was elected on November 8, the Canadian five-year bond yield has risen by about 0.4%. That has, in part, caused some banks to raise their prime rates on variable rate mortgages and rates on fixed-income mortgages, in some cases by between 0.25% and 0.4%.<\/p>\n
What this means for you<\/h3>\n
With mortgage rates increasing, it makes it harder for first-time homebuyers to enter the real estate market. New buyers will be left with the choice to wait and save up more money for their down payment, or find a less expensive place.<\/p>\n
However, there are still low mortgage rates to be had. Ken Walus, Assistant Vice-President of Mortgages at Investors Group, says that even if you don\u2019t have the required down payment, and must qualify for a mortgage at the Bank of Canada\u2019s posted rate, many lenders still offer variable or fixed rate mortgages that are below 3%.<\/p>\n
But it\u2019s not just the rate that matters, he says. Mortgages need to fit your lifestyle, too. If you want peace of mind about the mortgage rate you\u2019ll be paying for the next five years, a fixed rate mortgage may be the right choice. If you are financially comfortable to wait and see what happens, a variable rate might be the answer.<\/p>\n
\u201cNo one should be losing sleep over their mortgage rates,\u201d says Walus. \u201cWhether it\u2019s a fixed or variable mortgage rate, you have to be confident that you\u2019ve made the right decision.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
While Canada\u2019s overnight rate hasn\u2019t budged in a while, mortgage rates are climbing. Here\u2019s why and what it means for you. By Investors Group \/ January 2017 Over the last few years, buying a home has never been easier. Ultra-low mortgage rates \u2013\u00a0often in the two\u00a0to three\u00a0percent range \u2013 have…<\/p>\n","protected":false},"author":26,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-202034","post","type-post","status-publish","format-standard","hentry"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/metroactive.org\/wordpress\/wp-json\/wp\/v2\/posts\/202034","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/metroactive.org\/wordpress\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/metroactive.org\/wordpress\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/metroactive.org\/wordpress\/wp-json\/wp\/v2\/users\/26"}],"replies":[{"embeddable":true,"href":"https:\/\/metroactive.org\/wordpress\/wp-json\/wp\/v2\/comments?post=202034"}],"version-history":[{"count":0,"href":"https:\/\/metroactive.org\/wordpress\/wp-json\/wp\/v2\/posts\/202034\/revisions"}],"wp:attachment":[{"href":"https:\/\/metroactive.org\/wordpress\/wp-json\/wp\/v2\/media?parent=202034"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/metroactive.org\/wordpress\/wp-json\/wp\/v2\/categories?post=202034"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/metroactive.org\/wordpress\/wp-json\/wp\/v2\/tags?post=202034"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}