What Is Going On Lately With Mortgage Rates?
Fears over the COVID-19 pandemic and plummeting oil prices have caused mortgage rates to plummet to multi-year lows over the past couple of weeks.
The first two weeks of April, some lenders actually started to raise rates. Fixed rates on certain terms have been creeping back up, while some of the big banks have been quietly cutting their discounts on prime rate (which affects floating rates).
Scotiabank, for example, in March, raised its published 5-year closed variable rate 60 percentage points on Saturday, from 3.45{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8} to 4.05{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8}.
A host of other lenders have also been slashing their discounts from prime by anywhere from 20 up to 75 basis points. At one lender, for example, a new borrower could have obtained a high-ratio 5-year variable mortgage at Prime – 1.00{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8}, or 2.45{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8}. Today, that same rate is now Prime – 0.25{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8}, or 3.20{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8}.
Despite the Bank of Canada’s emergency rate cut on Friday the 13th, markets are still pricing in an additional 50-bps cut when the Bank meets next month. That will bring Canada’s overnight lending rate down to 0.25{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8}.
Knowing this, banks are starting to increase the discounts from prime so that the economics of funding variable-rate mortgages continues to make sense.
For those in the market for a new mortgage, and who are leaning towards a variable rate, we recommend obtaining a rate hold as soon as possible.
