As you may or may not have heard, we’ve recently seen a drop in Fixed Rates.  Here are a few of the lowest Fixed Rates currently available to Canadians:

5yr @ 3.64%* – 3.79%

4yr @ 3.49%

3yr @ 2.90%

*some conditions apply (i.e. prepayment flexibility etc)

How are Fixed Mortgage Rates determined?

The Canadian government and the Bank of Canada both play a major role in setting fixed mortgage rates. Fixed mortgage rates are influenced by the major bond yields. Bonds have always been considered a safer investment than equities and stocks. This is especially true when considering Government bonds.
When an economy is booming, most investors will invest in stocks and equities because they will earn a higher rate of return. This causes demand for bonds to decrease.  When this happens, the bonds must increase the yields of the bonds to entice investors.
When an economy is in a recession (much like today), investors will search for a safe place to store their money. Stocks will decrease or have a negative yield, which will cause investors to put money into bonds. This will cause bond yields to go lower because of the increased demand.

When the economy changes, the government of Canada is forced to increase or decrease long term bond prices. When this happens, it will reduce or increase the lending costs for banks. The banks will then pass on these new rates to borrowers by increasing or decreasing fixed mortgage rates.

For more information about rates and where we currently stand in the grand scheme of things, please don’t hesitate to give me a call.