A look at the lowest available mortgage rates on fixed and variable terms and HELOCs this weekNathan Denette/The Canadian Press
Fixed rates edged up again this week as Canada’s bond market followed U.S. yields higher. Canadian yields have had incredible upward momentum thanks mainly to the North American economy’s refusal to break.
But rest assured, central banks will do their best to break it. That includes the Bank of Canada. Markets imply better than a coin flip’s chance of a hike on Wednesday.
Government intervention keeps mortgage defaults at bay, at a cost
That would drive the benchmark prime rate up to 7.2 per cent, its highest since 2001.
I hear many anecdotal reports of borrowers capitulating and locking into five-year fixed rates. You hate to hear that, given the odds we’re approaching the top of a rate cycle. Yes, if you’ve been reading this column, you know I wrote the same thing in March when the market was pricing in rate cuts by year-end. But cycles take time to top out, and markets never get the timing exact. Ultimately, macroeconomic rate timers must be patient, and some borrowers can’t afford patience and risk. They just want the uncertainty to end.
For those who don’t want to bet on lower rates next year, three-year terms remain a popular compromise. They have much more flexibility than a five-year fixed if rates fall, including less prepayment penalty risk for those who exit their mortgage early.
For well-qualified, risk-tolerant borrowers willing to bet that Canada’s yield curve and leading indicators are right about recession, locking in long-term entails more risk than it mitigates. They’d do well to avoid any fixed term over three years.
Robert McLister is an interest rate analyst, mortgage strategist and editor of MortgageLogic.news. You can follow him on Twitter at @RobMcLister.
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