Rate-cut rumblings could spur sweeter mortgage deals
Robert McLister: If you shop around, you can now land variables as low as 6.55% if uninsured, and 5.90% if insured
Fixed-rate mortgage funding is tightly tied to the bond market, so this latest dip in yields is inspiring cuts at a slew of lenders. Canada’s lowest nationally advertised fixed rates are down to 5.29 per cent uninsured and 4.84 per cent insured — both five-year terms. We should see uninsured fixed rates slide into the “4” zone before too long.
On the variable-rate side, discounts off the prime rate have been improving for three months. If you shop around, you can now land variables as low as 6.55 per cent (prime minus 0.65 per cent) if uninsured, and 5.90 per cent (prime minus 1.30 per cent) if insured. We’re still months away from a lower prime rate, however.
Speaking of which, both the Bank of Canada and the Fed have dropped their explicit rate hike biases — hinting that it’s time to lounge in the rate cut waiting room. But that assumes we get no more inflation shocks out of left field.
Former Bank of Canada deputy governor Paul Beaudry told CIBC he thinks the central bank’s first cut could happen in July. Meanwhile, forward rate data from CanDeal DNA imply the first cut by June, with 225 bps of total easing. These estimates will change as economic data unfold, but regardless, we should be on the down slope of a new rate cycle later this year.
In other news, BMO has made a comeback in the mortgage broker market after exiting the channel 17 years ago. The move gives mortgage shoppers wider access to discounted rates from Canada’s fourth-largest bank.
Both these moves create more competition in the broker market, which can lead to lower rates and more flexible lending guidelines. And with the curtain likely closing on HSBC Canada’s broker division after RBC’s takeover on April 1, the timing couldn’t be more spot on.