Market volatility could drive some mortgage rates lower. Here’s why
Canadians gearing up for a run at the fall housing market and existing homeowners with a mortgage renewal looming might see interest rates heading down in the weeks ahead thanks to recent market volatility, experts tell Global News.
Stock markets around the world largely recovered Tuesday from a global selloff triggered by weak jobs data in the United States. But that volatility in equities also impacted the bond market, a key driver for fixed mortgage rates.
The five-year government of Canada bond yield, which lenders use to gauge their five-year fixed-rate mortgages on offer, briefly dipped below three per cent this week for the first time since last spring.
Penelope Graham, mortgage expert at comparator site Ratehub, says the bond market is typically a “safe haven” for investors in times of volatility in the stock market. Traders pile into bonds during signs of trouble, pushing prices higher and yields down.
With lenders looking to the bond market to set their rates on offer, “that really sets the stage for additional fixed mortgage rate discounts,” she says.
Graham notes that fixed rates have already been heading down in recent weeks amid easing in the bond market tied to expectations for the Bank of Canada’s rate cuts. With the central bank delivering back-to-back interest rate cuts and keeping the door open to more, bond yields have largely been trending down since May on expectations for lower borrowing costs to come.
The lowest rate on an insured, five-year fixed mortgage on Ratehub is 4.29 per cent right now, Graham notes, a low not seen since last spring when the housing market saw a brief burst of activity.
“We could be set to see additional discounting if yields do trend lower,” she says.
After the Bank of
Read more on globalnews.ca
