Jim Flaherty’s announcement last month enforcing stricter mortgage regulations was a call to arms on Bay Street. The street, which plays host to Toronto’s financial almighty, would play scene to a duel more commonly associated with America’s Old West rather than Canada’s financial epicenter. The big banks of Canada waited anxiously, eyeballing their opponents, to see who would be the first to reach for the trigger. On Monday (February 7th) of this week they got their answer as TD Canada Trust shot their posted 5-year fixed closed rate up 25 basis points. As is usually the case in these matters of nerve, once the first shot rings out more will follow as was to prove the case as CIBC responded by increasing their 5 year closed fixed rate 25 basis points later on that day. So what will be left for the borrower when the dust clears and the banks finally holster their pistols?
Well the good news for our clients is that it isn’t as bad as it all appears. The fixed rates have been under pressure from all sides since Flaherty’s announcement. Big banks have been under pressure to move in line with Bank of Canada’s restrictive approach to lending and bond yields have been moving up as investors (spurred by good unemployment numbers and strong corporate earnings) sought out riskier assets. While this may put a slight upward push on fixed rates, we are not expecting a surge in these rates. Factors such as the increasing uncertainty in world markets should ensure that any rise in bond yields are restrained.
As we have been preaching for the past few months, we still believe variable rates are the place to be at the moment but this is not to say our fixed rate-seeking customers should be overly perturbed. We, at Morcan Direct, given our ability to source non-balance sheet lenders can still find you a rate which works for your budget. If you or anyone you know are worried about rising rates and would like our advice please do not hesitate to contact us.