14 may 2010

It’s good news for mortgage shoppers who’ve seen fixed rates hike in the last month.
The latest drop started last Friday, just when TD Canada Trust and Bank of Montreal both announced similar trims.
It should be noted that longer-term fixed mortgage rates depend on longer-term bond yields. The Greek crisis put a stop to rising bond yields, because traders started moving money out of risky assets.
General mortgage information
Canadians with mortgages: 5.55 million
Average Canadian mortgage: $138,000
Borrowers who chose fixed rates in 2009: 65%
Most popular term: 5 years
Source: CAAMP
“Of course, treasuries and Government of Canada bonds have benefited from a flight to quality on the back of debt concerns in Greece and other countries of Europe,” – said CIBC World Markets.
Mortgage experts believe the pause won’t be long – they say bond yields are already edging higher.
It’s obvious, that variable mortgage rates are strongly tied to the Bank of Canada’s overnight lending rate.
Bond traders still expect the Bank of Canada to raise short term interest rates on June 1.
According to TD Waterhouse report credit markets are putting a 84 per cent probability on a 25bps hike in overnight rates after the central bank meeting in June.
BAX sentiment is putting a 94 per cent probability on another 25 bps rise in rates at the July 20 Bank of Canada meeting.

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