Mortgage Rates
Why do they go up and down?
You would go crazy - like me - if you watched the fixed rates. We saw them rise by almost .5% last March and then drop drastically to historical lows well under 4% in August. Now, we are hearing of pending rate hikes again. How do you make heads or tales of it when you are trying to lock in your mortgage rate? Well, let's keep it simple.
If you remember economics in college or university you know that supply and demand can effect price. The same is true with fixed mortgage rates. They are set by the yield in the bond market.
Over the past few months bond prices were down. This is because investors were looking for a secure place to put their money. The demand for bonds drove the prices of bonds down and the corresponding bond yield. The gap between the yield and 5-year fixed rates determines whether fixed rates rise or fall. So when the yield was down so were fixed rates.
Over the past few days we have seen the bond yield go up. This is because investors are now pulling their money out of bonds and putting into the healthier stock market. This means demand for bonds is dropping so they raise the price for bonds to attract investors. The yield is up and so fixed rates will rise as well.
How much will the fixed rates rise? Today TD Bank announced a 5-year fixed rate of 3.94% up from 3.69% the day before.
Will the rates drop again? If this activity in the stock market continues, investors may put more money into stocks. Some may move some into bonds with the increase in bond prices. We will have to see what happens over the coming weeks as to the impact on fixed rates.
For those consumers with a rate hold at the lower rates now is a good time to take advantage of that rate. If you don't have a rate hold - it is a good time to get one. If rates go up you are protected. If rates drop you get the new lower rate.
If you want me to run some numbers or review your current situation - no obligation - call me at 604 813 8402 or email me at pauline@mybcmortgage.ca.
Best fixed rates:
1 year term 2.3%
2 year term 2.95%
3 year term 3.10%
4 year term 3.40%
5 year term 3.49% (3.39% quick close)
7 year term 4.45%
10 year term 5.09%
|
