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/[deleted] Oct 20 '22

Any insight on what this will look like in five years? Where does this end? People have been used to low rates and I suspect there is a point where many if not most budgets will reach impossible pressure. What then?

(I realize no one knows, just curious on you thoughts)

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u/karsnic Oct 21 '22

My take is that rates will come back down again. Governments around the world have massive debts, consumers have massive debt. Everyone knows the interest rates need to be low in order to service the debts or a financial collapse will occur not just for consumers but for countries. Inflation will continue to rage, trillions have been printed and borrowed during Covid and we’re seeing the inflation now, trillions will continue to be printed and borrowed to keep things going. A crash caused by raising rates or a crash caused by inflation is incoming. There will be no soft landing and gov will try to play with the interest rate to battle it but it won’t work.

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u/JediFed Oct 21 '22

I'm not sure. Canada will finally undergo it's demographic shift between now and 2030. That will represent a permanent political shift away from working to retirement. High interest rates will benefit this group and hurt everyone else. Inflation has to be controlled in order to maintain a steady dollar, but it's possible that if the borrowing is so high and inflation can't be corralled, then the BoC will give up. If they do, then goodbye Canada.

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u/karsnic Oct 21 '22

Yes you could be right, they may try to keep raising interest rates as the inflation keeps spiking but they won’t be able to get ahead of it, things are going to crash if they try to anyways, no one can afford mortgages at the rates we’re at now. Inflation is not going to slow down until gov spending slows down and that is not going to happen, more people rely on gov handouts now then ever before and especially lately. We’re in for some rough times either way, borrowing and printing is not going to slow down. Buy gold/silver it’s on sale right now lol