How are Canadian Mortgage Rates Set?
The Canadian Chartered Banks set the prime lending rate (the rate they offer their best customers). The Prime lending rate is based on the Bank of Canada’s overnight rate. The Overnight Rate affect the Chartered Banks borrowing. About eight times a year the Bank of Canada makes rate announcements. Variable mortgage rates and lines of credit move with the prime lending rate.
Banks use Government of Canada bonds to raise money for fixed-rate mortgages. In the bond market, interest rates fluctuate by the actions of traders and bond investors. These traders and bond investors buy and sell bonds based on how they feel the economy will grow, how fast it will grow and where inflation is headed. As a result, Fixed-Rate Mortgages move with the bond market.
So watch the bond market to see which way fixed mortgage rate will go and listen the Bank of Canada rate announcements to see which way the variable rate mortgage will go.
Yesterday, some lenders increased their rates by as much as 60 points for fixed rate mortgages. This was due to economic changes (ie bond market). Notice that there was no change in the variable rates as no announcements were done by the Bank of Canada
Pingback: Predicting Canadian Mortgage Rates (via Toronto 416er) | In Bradford
Pingback: Predicting Canadian Mortgage Rates (via Toronto 416er) « stevensilva.ca