February is a quiet month as there is no Bank of Canada meeting, with the next one scheduled on March 7th, and there really hasn’t been any NAFTA news. However, the bond market has been on on the rise, increasing 10bp over the past 30 days, 100bp (1%) over the past year and 150bp since Trump was elected. I think its clear to say there is no turning back and rate below 3% are in the rear view mirror
After the Bank of Canada January increase, prime is now at 3.45% with the market pricing in another increase over the next few months its clear that variable rates are heading higher over the next 90 days. One thing that was not expected is that some lenders increased the discount to as low as prime – 1.25% (currently 2.2%), in some cases this is 1.4% lower than the same fixed rates, which is the largest spread in many years.
Based on the increasing bond yields most lenders have increased fixed rates over the past 30 days with the major banks offering a 5 year fixed rates in the 3.49% to 3.69% range, and non bank lenders between 3.09% and 3.39%. There are still a few lenders offering high ratio mortgage below 3%, but I don’t expect these to last much longer. Given rates have increased 1.3% in the past 15 months I don’t know how much more they can increase in the next 12 months, but its clear they’re not going anytime soon (unless NAFTA implodes)
Shawn Stillman, CPA, CA
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