Volatile Mortgage Rates During This Crisis

Volatile Mortgage Rates During This Crisis

John and Connie came back to us after 15 years to buy their dream home on March 8, 2020 at the beginning of the financial crisis due to the Coronavirus. Initially, the financial market was very worried and the bond market yields slid as did the Bank of Canada’s overnight rate (prime rate) yielding volatile mortgage rates.

Dodged A Bullet

What did we do? To mitigate volatile mortgage rates, we hedged him both ways, with a variable and a fixed product. We got them a variable product with (prime -0.75) which today is 2.95-0.75 or 2.20%. We also got them a fixed rate for a five-year fixed at 2.64%.

What are these today? Well, the variable is still at 2.95% but has no discount and the fixed rate is now 3.19%. Clients all week have been telling me they thought the rates were going lower.

What happened? Very simply, the risk level went up and so did the volatile mortgage rates. The world bond market sees this pandemic as very serious. This means that the rates that the Canadian banks borrow are going up. The market is spelling out they believe the Coronavirus will cause considerable economic shocks, including heavy losses for the financial institutions.

What Does The Future Hold?

It is safe to say volatility is high and as long as it stays high, rates could go and as long it stays high rates could go higher. When will it end? Again, when we get a handle on this pandemic and when we can assess the damage to our Canadian economy. Until then, keep vigilant as to when your mortgage matures.

Robert Floris is a Mortgage Broker. His office is located at 651 Fennell Avenue East in Hamilton, Ontario. If you would like to speak with Robert, he can be reached at 905-574-9200 #215. Alternatively, you can contact Robert here.

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