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Mortgage Rates Keep Setting New Record Lows

Steve Huebl
Publication date:
June 30, 2020
Article Summary: 

Mortgage rates have been tumbling steadily over the last couple of months, with certain 1- to 5-year fixed rates now available for under 2.00% from discount brokers. This is due to concerns over a second wave of COVID-19, which has caused Canada's 5-year bond yield to fall to its own record-low. The Bank of Canada's ongoing $5 billion in weekly government bond purchases has continued to uphold lender confidence that markets will remain liquid, allowing them to offer lower rates as funding costs fall. The BoC's quantitative easing programs are helping to reduce the risk premiums that have elevated fixed-rate lending spreads above their normal levels. Variable rates are continuing to fall, even though prime rate hasn't budged from 2.45%.

Lenders have been gradually reducing their variable rates by increasing their discount from prime rate, with the lowest nationally available floating rate being 1.95%. The rock-bottom rates are great news for new homebuyers, but can be a source of frustration for current borrowers who are locked in at much higher rates. A recent piece explored a real-life situation of a borrower breaking a 5-year fixed rate of 3.39% to lock into a much lower 2.29% 5-year fixed rate. After making a 20% lump-sum prepayment and reinvesting the monthly mortgage payment savings back into the mortgage, the borrower still comes out ahead by $19,248 after five years.


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Source Citation: 
Steve Huebl
Mortgage Rates Keep Setting New Record Lows
June 30, 2020
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