Fixed-rate loans are falling, according to James Laird, CEO of mortgage broker Canwise Financial and co-founder of rate comparison website RateHub.ca. While specific rates will vary based on the borrower and what part of the country they're in, currently the best deal on offer for a five-year fixed loan is 2.64 per cent with a trust company and 2.74 per cent from a big bank. Barely a month ago, those rates would have been roughly 10 to 20 points higher.
- While bond yields have fallen by about 40 basis points in that period, that means lenders so far have only passed on about a quarter of those savings to consumers. But that is likely to soon change.
Lenders are always slower to pass on savings than they are to pass on added costs, Laird said, but they can only hold off for so long.
"If bond yields were up by 40 points, you can guarantee far more [lenders] would have changed rates and by a greater amount," Laird said. "On the way down they're a little slower ... they enjoy thicker margins for a while."
Coronavirus fears have really only sped up the process of a move toward lower rates that was already underway, he said.
In its policy decision last week, the Bank of Canada elected to keep its benchmark interest rate where it is for now. But by singling out concerns over the job market, international trade and other factors, it's clear the bank is leaning more toward rate cuts than hikes, Laird said.
Variable-rate mortgages set their rates based on what the Bank of Canada is doing, not bond yields. And based on the central bank's last statement, traders think there's about an 80 per cent chance of at least one rate cut by the end of 2020. That means home buyers with variable-rate loans can expect some relief soon, too.