Posts Tagged ‘governemnt of canada’
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.
Understanding Interest Rates
Buying a home is usually the biggest financial transaction most of us will make in our life. Therefore shouldn't you understand the financing process and what causes interest rates to move up and down? I am going to attempt to shed a little light on the subject and hopefully after you spend the next couple of minutes reading this post you will be much better informed. Like most people who own a property or are thinking of purchasing a property, you have been watching interest rates closely over the last few months. You have also probably noticed that the governments prime rate has been falling steadily in Canada. So how does this translate into the rate you are going to pay for your mortgage? It turns out the correlation is not as direct as you might think. The first point I want to stress is the banks do not finance your mortgage by borrowing money from the government. Therefore the government's prime lending rate does not have a direct impact on your mortgage. Mortgages (variable and fixed) are financed through the banks' deposits. This is where the banks get all of the ...
