Bond Yields Are Up – Will Mortgage Rates Follow?
We have been enjoying falling mortgage rates over the last few weeks, but we might be in for a reversal. Strong economic data released on Friday in Canada and the US has resulted in bond yields increasing by .14%. As I have explained before fixed rate mortgages in Canada are driven by government bond yields so it is probably only a matter of time before we see lenders start to increase rates. At the very least we will see a halt to the falling rates and we will probably hover where we are for the remainder of the year. Right now 5 year rates are slightly below 4% which is well off the 10 year average of almost 5.5%.
The Bank of Canada will be holding its last rate announcement of the year tomorrow and it is expected they will leave the prime lending rate were it is. The Bank of Canada has pledged to keep rates where they are until mid 2010, but if we see continued positive job creation in the coming months they might be forced to start increasing rates.
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