*Updated* Ongoing Bank of Canada Benchmark Rate Announcements

[MillerTime GFG]

Originally Posted by blankall

Not sure if we've discussed it already, but Canada also made pretty big changes to the insured mortgage threshold in December, raising it from $1 to $1.5 million. Could have a fairly major impact on the housing market, in the next feeding frenzy.

And 30-year amortizations for those doing a new build, or first time buyers.

[The Fonz]

5-yr bond yield is down to 2.81% today - does that put the 5-yr fixed rates at that 4.00-4.25% now?

[rohara66]

Originally Posted by The Fonz

5-yr bond yield is down to 2.81% today - does that put the 5-yr fixed rates at that 4.00-4.25% now?

We just renewed our mortgage and RBC had offered us a 5 years fixed at 4.19% last week.

[blankall]

Originally Posted by chemgear

Hey, you can't afford anything? It's okay, we'll let you borrow more and get into even more debt!

It is a bit nuts. I don't mind providing people with help easing their payments, but encouraging people to buy with less and less money down seems like an awful idea. If you don't have the fiscal means or responsibility to save 20% for the down payment, you're probably not the best person to take on all that debt.

[Nancy]

Originally Posted by rohara66

We just renewed our mortgage and RBC had offered us a 5 years closed at 4.19% last week.

Did you mean to say “fixed”?

[rohara66]

yup, fixed. brain fart

[PaperBagger'14]

Can someone explain this to me. When the BoC raises the interest rate mortgage renewal rates go up immediately but when rates are slashed by the BoC mortgage rates are tied to bond yields. Why are rate rises / falls dependent on 2 separate metrics? Is it a risk management strategy from the banks?

[Fuzz]

Just going on a limb here, but I think it's a money making strategy for the banks. It's only when one big bank, or the smaller lenders start dropping rates that they have any incentive to follow.

[opendoor]

Originally Posted by PaperBagger'14

Can someone explain this to me. When the BoC raises the interest rate mortgage renewal rates go up immediately but when rates are slashed by the BoC mortgage rates are tied to bond yields. Why are rate rises / falls dependent on 2 separate metrics? Is it a risk management strategy from the banks?

They're not. Variable rate mortgages generally move in lockstep with the BoC rate both up and down. Fixed rates move with bond yields, again both up and down. Two different types of mortgages with each having their own thing driving the rates.

But bond yields are primarily based on the market's prediction of future rate trajectories, so fixed rates will normally move before variables do. So they went up significantly before the first interest rate increase in 2022 and started dropping 6-7 months before the first rate cut.

[Jason14h]

I am variable and got the email this morning that my rate dropped effective Feb 1

[PaperBagger'14]

Originally Posted by opendoor

They're not. Variable rate mortgages generally move in lockstep with the BoC rate both up and down. Fixed rates move with bond yields, again both up and down. Two different types of mortgages with each having their own thing driving the rates.

But bond yields are primarily based on the market's prediction of future rate trajectories, so fixed rates will normally move before variables do. So they went up significantly before the first interest rate increase in 2022 and started dropping 6-7 months before the first rate cut.

Thank you for this, I’ll be doing some research on bond rates and how they are set. Do you have any starting points on where I should look?

I did some basic reading describing the handful of formulas used in judging a bonds performance, but I’d like to understand the purpose and back story more before I care about the “how” of bonds.

[Slava]

Originally Posted by PaperBagger'14

Thank you for this, I’ll be doing some research on bond rates and how they are set. Do you have any starting points on where I should look?

I did some basic reading describing the handful of formulas used in judging a bonds performance, but I’d like to understand the purpose and back story more before I care about the “how” of bonds.

Bond rates aren’t “set” though. Bonds trade in the market, similar to stocks and the prices fluctuate. The Bank of Canada sets the overnight rate, but for longer term bonds it’s out of their hands.

[blankall]

Originally Posted by PaperBagger'14

Thank you for this, I’ll be doing some research on bond rates and how they are set. Do you have any starting points on where I should look?

I did some basic reading describing the handful of formulas used in judging a bonds performance, but I’d like to understand the purpose and back story more before I care about the “how” of bonds.

If you learn to predict bond rates, you're going to be very wealthy.

[The Fonz]

5-yr bond down to 2.55%. There should be some sub-4% 5yr fixed rates floating around now?

[The Fonz]

BMO now forecasting 6 consecutive 25bps cuts at each meeting, ending at a 1.50% benchmark rate by October.

[Sidney Crosby's Hat]

Originally Posted by The Fonz

BMO now forecasting 6 consecutive 25bps cuts at each meeting, ending at a 1.50% benchmark rate by October.

That's interesting. They must not think that the tariffs will be around for long. I mean, Mexico's have already been rescinded so it's probably a relatively safe bet.

[kevman]

Originally Posted by opendoor

They're not. Variable rate mortgages generally move in lockstep with the BoC rate both up and down. Fixed rates move with bond yields, again both up and down. Two different types of mortgages with each having their own thing driving the rates.

But bond yields are primarily based on the market's prediction of future rate trajectories, so fixed rates will normally move before variables do. So they went up significantly before the first interest rate increase in 2022 and started dropping 6-7 months before the first rate cut.

Except 10 years ago when the BoC made two 25bps cuts from 1% to 0.5% and the major banks only made 15bps cuts. Yet when rates raised back up to 1% and higher the banks made sure to match the full increases. Bank prime was always +2% above BoC prime, now it's +2.2%.

Yes, I'm still bitter.

[TheIronMaiden]

Originally Posted by The Fonz

BMO now forecasting 6 consecutive 25bps cuts at each meeting, ending at a 1.50% benchmark rate by October.

Please!

[MacDaddy77]

If it gets to 1.50 by October I'll be taking a 10 year fixed rate this time.

[blankall]

Originally Posted by MacDaddy77

If it gets to 1.50 by October I'll be taking a 10 year fixed rate this time.

I know this is a joke, but 10 year rates are typically 1.25-2% higher than the 5 year rates. Doubtful you'll see a 10 year rate below 4 or even 5%.