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Banks/Lenders are paying bonuses on Fixed Rates…

Finance | David | June 20, 2019

I’ll address rates right out of the gate because I’ve had dozens of inquiries lately with the sharp drop in Fixed rates since December 2018. I’d like to make mention my Variable rate mortgage is at 3.20% now and Fixed rates have dropped below my rate too. 
Above is a link to the Canada Savings Bonds that have matured since 1999 
As you can see 2015/2016 were low points at around 1.00 – this was the time when we saw 5 year Fixed rates around 2.49% – some as low as 2.24% 
We see the bonds rose in 2017 (marginally) and during that period we saw 5 Year Fixed rates rise to 4.00% at their peak last year around Oct/November and then have steadily dropped to presently around 3.00%. This year lenders have been offering brokers a bonus to lock people in to Fixed rates. Banks are making a BIG push for Fixed rates as I’m sure you’ve all received calls or pushes through your banker/tellers. BUT as you can see 0.80 are the yields. So, one really can expect, based on these yields, to see rates drop to the same level they were a couple years ago. Possibly lower. 
We’re not in a rush, and past clients are on our list of reach out to as soon as we see Fixed rates hovering around 2.49% or at least have an indication they may rise. Currently zero indication whatsoever that rates will rise, and Bank of Canada is saying they will not be touching Prime (Variable) until in to 2020 / until we see an economic turn around. Banks/Lenders have been bonusing compensation for Fixed rates all year – a clear indication there is room for them to discount further. 
Park in Variable for the time being because you can always lock in to a Fixed anytime, no penalty or fuss, not the other way around.

Major Market news is coming out of the trade war developments between USA & China. 

China is in a weak position for negotiations and as such are at risk of a full-blown recession which will cause devaluation of their currency. Capital flight is expected to increase in the coming months with signals that the Yuan will depreciate due to this looming recession. 

The above chart shows the jump in imports when capital flight was at it’s peak in 2015/2016 when mainland companies were using inflated invoices to take money out of the country. It would be naïve to believe our government has implemented rules strict enough to pose a threat to wealthy buyers overseas parking money in Canadian real estate (Commercially or Residentially) 
In speaking to our West Vancouver/Vancouver real estate partners we are learning market activity in the past 3 weeks has had a dramatic increase. The combination of low interest rates and a sudden spike back up in property values could result in an exceptionally busy market again. We’ve started seeing multiple offers on many product types (condo/townhouse/detached) in many different cities. 
Just wait until the media takes hold of some of these stats. 
Goooood night! I’ll try get some sleep now while I can. 
Any questions about your specific mortgage, what to do with your equity in picking up rental properties (another big question from past clients lately) or measures to take advantage of lower rates consolidating debts please let us know! Happy to help

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