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Interest Rates Dropping - March 27, 2019

In the past couple weeks we have seen interest rates drop lower and lower that are being offered by the lenders on fixed rate mortgages. What a lot of my clients don't seem to realize is that variable & fixed rates are completely different from one another. Here is a little more about that....

Fixed Rates

Fixed rate mortgages are being offered at lower rates over the last couple weeks. We have seen 5 year fixed rates go from 4.04 to 3.29 in a very short amount of time. This is great for borrowers and we have seen a lot of fixed-rate people who are very happy with these new offerings.


The cost of financing these mortgages has gotten cheaper for the lenders so they are able to pass on this savings to the borrowers. Banks borrow money in the bond market to offer to clients in mortgages, as the bond yield continues to drop they get access to this money at lower rates.

The concern...

Typically a lowering bond yield curve is a signal that we may be heading into a recession. Lower bond yields are typically not a good sign from an economic standpoint.

So what about our clients that are opt-ing for variable mortgages?

Variable Rates

Most economists are predicting no increase and the potential for rate decreases in 2019. What is better is that we are still seeing prime-1% being a typically offering on a variable rate mortgage, this is an awesome discount compared to the years where prime-0.3% was the best you could get.


Variable rates are actually tied to the Bank of Canada prime rate, NOT the bond market. The variable rate has the potential to move up or down at the 8 pre-scheduled meetings of the BOC each year. It seems most economists believe that our economy is headed into hard times (recession) sometime in the next 5 years (likely 2020 ish). There is potential that we will see many rate decreases at that time that savvy borrowers can take advantage of should they be positioned properly to do so.

For a full assessment of what options are best for you please reach out to me at 416-271-5307 or I would be happy to walk you through your options.

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