Where Are Mortgage Rates Trending?

Keeping track of near term variable and fixed mortgage rate changes are fairly simple.

Variable mortgage rates are tied to the widely publicized Bank of Canada benchmark rate. As the benchmark rate goes UP or DOWN your variable rate mortgage will rise or fall the same amount. The Bank of Canada meets about 8 times a year to set the rate and provide an outlook on future rate changes. The annoucements and insight into the Bank of Canada are posted regularly on our Canada Mortgage Superstore Blog.

Changes to the Bank of Canada rate effect those currently holding a variable mortgage.

Fixed rate mortgages change more frequently and outside of the Bank of Canada’s direct influence. Fixed mortgage rates are tied to how the Government of Canada bonds are trading. As the bonds go up and down, so do the mortgage rates being offered by the lenders. Fixed rate mortgages are determined by taking the current 5 year rate (for example) and adding a spread (the lenders profit) of between 1.40% and 1.60%. If bond yields go up, the lenders spread will shrink outside of 1.40% and this could trigger mortgage rates to rise. If the bond yield goes down, the spread could increase outside of the 1.60 spread and this could trigger an interest rate decrease (due to competition from other lenders). As an example, if the 5 year Government of Canada bonds are trading at 3.00%, 5 year fixed mortgage rates can expect to be between 4.40%-4.60%. The bond yields are determined by investors expectations about where the interest rates will be in the future. If the investors believe that the long term interest rates are going to go up, this would put a pressure on the bond yields and could cause them to increase.

Unlike variable rate mortgages, if you are already have a fixed rate mortgage, daily mortgage rate fluctuations will NOT affect your rate during the term of the mortgage. The daily variations in the bond rate only affects the rates being offered to people currently LOOKING for a fixed rate mortgage.

Current Canadian Government Bond Rates

Current 5 Year CDN Bond Rate
Current 3 Year CDN Bond Rate