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Drop In Fixed-Term Mortgage Rates Is Imminent, Experts Say

Drop in fixed-term mortgage rates is imminent, experts say
Globe and Mail ~ January 7th, 2019

Falling bond yields should push fixed-rate mortgage costs lower in the near-term, possibly as early as this week, mortgage industry experts predict.

Yields on five-year Government of Canada bonds – which help determine the price of fixed-rate mortgages – have fallen sharply since November, dropping from a recent high of 2.46 per cent on Nov. 8 to 1.86 per cent as of Monday, a decline of more than half a percentage point. Yields particularly started to dip in late December, hitting a recent low of 1.75 per cent by Jan. 3.

Yet, mortgage rates in Canada have not followed suit, which has led many experts to predict a mortgage-rate decline is imminent.

“We are expecting to see changes this week as people get back to their desks and look at their screens,” said James Laird, co-founder of of mortgage tracking firm Ratehub Inc. and president of mortgage brokerage CanWise Financial.

Mr. Laird believes fixed-rate mortgage costs must drop because five-year Government of Canada bond yields are lower now than they were at any point in 2018, yet featured five-year mortgage rates for most of last year were under 3 per cent. Most lenders are currently charging between 3.3 per cent and 4 per cent as their featured five-year fixed mortgage rate, which is high in relation to bond yields.

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