Have we seen the last of the super low mortgage rates in Canada?
When will mortgage rates start falling again is a question that is being asked quite often these days. The question about the expectations of the current mortgage rates are valid especially since bond yields have been falling over the last few weeks (from a high of 2.82% on June 10th to 2.42% on July 7th).
The first three months of 2009 mortgage volumes were very low as a result of a depressed housing market. During Spring Market, the banks began competing with low mortgage interest rates for market share. As a result profitability was taking a back seat to market share and we saw very competitive mortgage rates from the banks.
Banks were treating a mortgage as a loss leader to get that client in the door and sell them the bank's other products and services. Some other banks also had extra deposit money from the RRSP season to lend out.
Now, into the third quarter of 2009, profitability is again top of mind. Remember year end for Canadian banks is Oct 31. They only have 4 months left to hit their revenue targets and are not willing to sacrifice profitability for market share any longer.
Therefore, we are now seeing banks hanging onto this higher spread for as long as they can. There may be some movement soon, but banks are ensuring bond prices stay consistent before they make a move.
Brad Compton
Mortgage Consultant, Invis Inc
phn: 416-671-2183
bradcompton@invis.ca
www.YourLowMortgage.ca
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