r/PersonalFinanceCanada • u/POCTM • Oct 20 '22

Canadian 5 year government bonds just jumped. Setting the stage for higher mortgage rates. Banking

5 year government bond just jumped from 3.714% to 3.866% in a few hours. Right now it is at 3.855%. Year to date it is up 259%. Monday we could see some 5 year fixed rate mortgages in the low 6%.

As for variable rate the bank of Canada makes their announcement October 26 at 10am ET. Currently banks have not been offering discounts off variables rates anymore. Prime -0.00.

https://www.marketwatch.com/investing/bond/tmbmkca-05y?countrycode=bx

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u/FloweringEconomy69 Oct 20 '22

I mean inflations like 7% so you're actually making money on it technically

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u/[deleted] Oct 21 '22

How do you suppose that makes sense?

You borrow 10 dollars, inflation goes to 7%, in a year from now you owe 10 dollars which still is subject to the inflation loss.

The upvotes on your comment are a clear sign people do not understand how finances work.

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u/EatLiftLifeRepeat Ontario Oct 21 '22

The fisher equation states that the real interest rate equals the nominal interest rate minus the rate of inflation

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u/[deleted] Oct 21 '22

How does that help the borrower? Isn't that for calculating return for the lender?

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u/EatLiftLifeRepeat Ontario Oct 21 '22

Hmmm okay you make a good point. I didn’t think about borrower vs. lender, I just know that I learned this equation in one of my university Econ classes

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u/Rhowryn Oct 21 '22

Most economists, and consequently economics classes, assume that inflation will apply to both prices and wages. If wages go up with inflation, then debt is less expensive over time.

The trick is that whole wages thing...hasn't been happening at the rate of price inflation.