One word can describe mortgage rates this past week, INCREASE. Over the past week we’ve seen mortgage rate increases for most terms. The biggest move was in the 5 year fixed rate.
Why did mortgage rates increase?
Bond market increases are what mostly drive fixed rate mortgages and recent volatility has been a big factor. After Ben Bernanke came forward and indicated that based on economic predictions the US may reduce the “quantitative easing”, all markets have been stampeding to factor in this possibility and this has brought in higher fixed mortgage rates.
We’ve seen roughly a 1/2% rise in the 5 year fixed (US mortgage rates have moved up similarly but on 25 yr fixed terms) in the past week HOWEVER, there has been no change to the POSTED 5 yr rates. In the past, when rates rise, so do the posted rates. The rate discretion being offered by lenders is what’s been reduced as a hedge against potential losses when the lenders securitize their mortgage funds. I suspect we’ll see some back peddling on these increases in the coming weeks once markets stabilize.
Where are rates going?
That’s the big question right now and as history has shown it’s impossible to predict. What I can recommend however, is that if you are planning to purchase or refinance in the next 120 days you should definitely get a rate hold.
What are today’s mortgage rates?
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Fixed vs. Variable
With these recent rate increases the fixed vs. variable discussion has come back into play. If you can qualify for one.
The Variable Rate is looking much more attractive than it has in the past. Prime minus .60% looks good compared to 3.39% for a 5 year fixed. That spread also factors in almost a 1% increase in the Bank of Canada rate. There has been no change in the Bank of Canada rate since Sept. 2010 and I believe we aren’t going to see an increase for a considerable length of time.
If long term security is more what you’re after, the 10 year fixed is looking more attractive now that the five year term has increased. Watch that term though as I’ve been getting notice that this will be increasing too.
Any questions about mortgage rates?
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