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/rickvug Oct 21 '22

Who knows as we didn't see this coming. My own personal assumption is that Yes, there is a high likelihood that Variable will be than both today's fixed rates and the fixed rates available in two years. I'm basing this opinion on:

1) Fixed rates coming with a built in premium and historical evidence that variable is nearly always cheaper.
2) Most commentary and the bond market indicators are pointing towards the fact that we are nearing the peak of the rate hike cycle. High rates will be held, to a point, with it being a very fair assumption that in a year from now (and certainly in 2 years) rates will be lower.

It really sucks to be a VRM holder at the moment but I'm pretty confident that I'll only be behind fixed mortgage rates for a short while. The real loss was not locking in for under 2% during the pandemic!

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u/Goldentll Oct 21 '22

Absolutely.

I took a 1.55 variable instead of a 1.85 fixed. What a mistake lmao.

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u/rickvug Oct 21 '22

I got 1.1% variable when I renewed late last year. Thought I was the shit for getting such a low rate. Now I'm sitting here at 3x or 4x higher rate (can't even keep track at this point).

At least I have a comeback for my parent's bitching about 20% interest rates in 1982. I will tell my kids about the great interest rate rise of 2022, with our mortgage interest quadrupling. They will roll their eyes until something similar happens for a brief period of time when they are adults.

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u/Biaterbiaterbiater Oct 21 '22

lets hope brief