Blog posts labelled: interest

Mortgage Rates Reach Historic Lows!

Posted on March 31, 2015 by Amalia Liapis

Posted in Bank of Canada, Bonds, Canada, Economics, Economy, Forecast, Interest, Interest Rates, Mortgage

With a major decrease in Canadian bond yields to 0.52 as of March 27, 2015. The plummet in bond yields is in part due to the surprise rate cut at the Bank of Canada's meeting in January. In spite of that, posted mortgage rates have moved slightly lower and banks passed through only a partial amount of the 25 basis point rate cut to prime rates that govern variable mortgages. The forecasts for future rate decisions have seen fluctuation. The five-year bond yield hit a record low of 0.59% but has since rebounded. The five-year fixed mortgage rate is currently at 4.74% which may be the absolute floor. The 0.75% decline in the five-year bond yield translated to only a 0.04% reduction in the qualifying rate.

It may be a while before mortgage rates move substantially higher. The mortgage rate forecast for 2015 and 2016 are shown below. Projections show that mortgage rates will continue to stay at historic lows for the remainder of the year. As the Canadian economy rebounds from the decline in oil prices and if the US Federal Reserve begins to tighten in the summer months, we may see some upward pressure on long-term interest rates in the last quarter of this year and into 2016.

Source: Bank of Canada, BCREA Economics

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International Fixed Interest Review

Posted on January 20, 2015 by Amalia Liapis

Posted in Equity, Global, Interest, Interest Rate, International, Monetary Policy

The changes in monetary policy coupled with the volatility in the global equity market is the primary reason for the developments in the international fixed interest markets. In the U.S., the Fed ceased its quantitative easing program in relation to bond purchasing which allowed for low bond yields. The 10-year treasury yield rose from 2.4 at the end of August 2014 to 2.6% by mid-September. However, with the global equity volatility kicking in, the U.S. 10-year yield consequently dropped to a low of 2.16% in mid-October. Investors saw a slight rise in the yield following the dip in the yields. Unfortunately, the yield as of January 20, 2015, has dipped to a low of 1.82%.

Looking towards Europe and Asia, the focus has been on a looser monetary policy. The European Central Bank moved towards a quantitative easing program and the Bank of Japan has announced a substantial increase in the level of its bond purchasing. As a result, bond yields have dropped in the two markets. In Europe, the 10-year German government yield has fallen to 0.45%. Moving over to Japan, the already low yields have dropped even further to 0.22%.

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