Yields Spike. Fixed Rates May Follow
If you’re house hunting or thinking of refinancing, and you don’t have a mortgage rate hold, consider getting one.
Canada’s 5-year bond yield just pierced a 3-month high. That means—barring a big reversal—there’s a good likelihood that fixed rates will ratchet higher. (Bond yields steer fixed mortgage pricing, most of the time.)
(Click chart to enlarge)
- a brightening picture south of the border, including:
- lower perceived global risk (which reduces demand for “safe” government bonds)
- technical-related bond selling.
Everyone’s got their own theory on how many legs this yield rally may have. Some are proclaiming the end of the great bond bull market. But that has been said countless times before. And bull markets don’t have to all-of-a-sudden reverse direction. Yields can just as easily move sideways…for years. (Note: Bond yields move inversely to bond prices.)
Either way, inflation ultimately drives yields and mortgage rates. Notwithstanding the bond-unfriendly U.S. news, Canada has core inflation of just 1.1% (2.0% is the BoC’s target), tepid GDP growth and questionableemployment gains. There is little domestic news (yet) which suggests that Canadian yields will keep soaring. But at some point, that may no longer be true.
via Canadian Mortgage Trends