Here we go… The bond market rally is squeezing spreads, placing upward pressure on the fixed interest rates. Last week we saw the 5 year bond fall to 1.15 its lowest point since July 24, 2012, more than 10 months ago. Currently the 5 year bond sits at 1.34, up 19 basis points (bps).
My Canada Mortgage Direct Rate Barometer above depicts a spread well below the lender comfort zone nearing lows from just one month ago.
So what does this mean?
A compressed spread signals an interest rate hike is on the horizon. Should we see this rally continue into next week, I suspect we will see interest rates rise 10 – 20 bps.
Important note: any increase in fixed rates will NOT affect the variable/adjustable rate market. If you are cuurently in a variable or adjustable rate product, Prime rate will remain at 3%. Prime rate will NOT be increasing anytime in the near future.
My advice is to speak with your Alberta mortgage broker to strategize in order to secure products at today’s competitive rates. Give our office a call at 403.242.5547 to get started. And if your are working with someone already, it never hurts to get a second opinion to ensure you indeed have the best mortgage product for your specific situation. The wrong advice can set you back years. Again, we can be reached at 403.242.5547.
Jeremy
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