The Bank of Canada announced this morning that they will be maintaining their overnight rate, which means there is no increase to prime rate. This is exactly what we were expecting to happen.
In most cases, the Bank of Canada scheduled rate announcements affect prime rate only, which then affects variable rate mortgages and HELOCs (Home Equity Line of Credit). They generally do not have a direct impact on fixed mortgage rates… most of the time.
More drops to fixed mortgage rates coming?
While prime rate will remain flat, bond yields are down 4.60% at the time of publishing this blog. This is a substantial drop for a single day. As fixed mortgage rates are determined by bond yields, today’s drop could be enough to move the needle, resulting in more cuts to fixed mortgage rates across the board. It’s possible that we could see fixed rates drop further before the end of this week.
The bond yields fell sharply through the months of February and March, which resulted in weekly drops to fixed rates. Earlier in the year, 3.49% was considered a good rate for a 5 year fixed. Now, there are 5 year fixed rates as low as 2.84% for many situations.
Today’s drop to the bond yields could be enough of a dip to trigger a new downward trend, which would mean multiple cuts to fixed rates may be on their way. Given the fact that economic growth was weaker than predicted earlier in the year, another downward trend to bond yields would not be surprising. In fact, I’d be surprised if we didn’t see it.
Currently, there are 5 year fixed rates available for as low as 2.84% – 3.09%, depending on your exact situation. Variable rate mortgages range from prime -1.20% to prime -0.75% (2.75% – 3.20%). With the spread between fixed and variable as thin as it is, more and more people are gravitating to fixed rates. But the right variable rate mortgage can still work out well in some situations.
The next scheduled interest rate announcement from the Bank of Canada will be on May 29, 2019.