June 27, 2013
Mortgage Rates are Going Up! The Question is "Why?"
In the last 2 weeks the 5 year fixed mortgage rate has gone up 3 times. This occurred because yields within the bond market increased by 66 basis points or .66%. The bond market is where lenders, including the banks, go to raise their money to lend out to borrowers like us. The higher the yields the higher the mortgage rates will go. Note that this only fixed rates are affected by moves in the bond market. And fixed rates move up, usually, long before the Prime rate which would affect variable rate mortgages.
Why are bond yields rising? There are several reasons:
1. Canada announced the biggest job gain in many years last month. Over 95000 new jobs.
2. The Federal Bank in the U.S. announced that it will look at starting to withdraw some of the stimulus it has been providing to the economy by way of buying up Government Bonds. The reason why they announced this is because their economy is also doing better.
3. A reduction in the "fear" premium within the bond market.
What does all this mean. It mean, possibly, if you are on the fence or you are considering buying a home in the near future now would be the time to get a rate locked in. A mortgage broker can hold a rate for up to 120 days so you can look at properties knowing that you have a rate guarantee until the expiry date.
If you have any questions regarding this please feel free to call or email me anytime.