This month’s feature: Fixed Rates Finally Move Up.

Your Mortgage Source Info Letter – May 2010 Edition

This month’s feature: Fixed Rates Finally Move Up.

For many months we have been receiving reports that fixed rates were going to start their push upwards with no action from the major lenders across the country. 

Well April was a different story. Fixed rates moved up 3 times during the month for a total increase of almost 1.00% on the 5 year fixed rate. The Royal Bank lead the increases and other lenders followed suit quickly.  During the previous few months lenders were holding rates artificially low in order to hold onto market share in the busy spring market.  However with bond prices rising, it was just a matter of time before rates went up. Given rates have increased so sharply over the month we expect them to moderate/level off over the next while rather than continuing with the sharp increases. 

With regards to Prime Rate, the Bank of Canada will next have an interest rate announcement on June 1st. Some are speculating that this could be the first increase in Prime while others are saying that it won’t happen until near the end of July.

In terms of what will happen with the Prime Rate we have two things for you to consider. The first is that we are still in a fragile recovery from the recession. If the Bank of Canada were to increase Prime too quickly this could easily damage any economic recovery that we expect to have. 

The second item which is even more important is the Canadian dollar. The U.S. has indicated that they will be in no rush to increase their rates and will be holding their base lending rate steady for quite some time. This means that if we increase our rates in Canada our dollar will become much more attractive than the U.S. dollar. This will push it even higher than it is now which will in turn hamper our economic recovery even further. It is for this reason alone that we feel that even if the Bank of Canada decides to raise rates, it will be very slow and drawn out. In fact, they may raise rates and then be forced to bring them back down if the dollar increases too much in value. Stay tuned for more information in our upcoming info letters. 

If you require any further information regarding this article or any other mortgage matters please contact our office at 604‐556‐3893. Also, as a reminder to anyone looking for a mortgage, we offer 4 month pre‐approvals at no cost to you.  This means that you can get a rate hold for up to 4 months to protect yourself in case rates rise. 

Rates 5 Year VRM: 1.75%* 5 Year Fixed: 4.59% 1 Year Fixed: 2.70%

Rates fluctuate daily and we may be able to obtain better rates than those shown. Please call our office for the most up‐to‐date Best Rates.  *Based on current prime rate of 2.25%. Rates above are best rates available and may vary depending on quality of the credit application. All mortgages are subject to credit approval