# The future of mortgage rates



## potato69 (Mar 21, 2018)

I bet on the housing bubble and lost. Although I've done reasonably well investing in the globally diversified index portfolio while renting I sure didn't make even close to as much as I would have from buying anything or anywhere in Canada (barring AB I suppose).

So I'm stuck at what to do at this point. Of course I want to buy a house just because renting condo's sucks and the kind of house that I want to live in isn't really available as a rental (I'm in victoria). Anyway, I feel paralized.

Anyway, the crux of my question has to do with a mortgage estimation calculator I was playing with today as well as looking at rate hub: Mortgage Payment Calculator | TD Canada Trust 

Playing with this tool it allowed me to choose various mortgage rates. I was very surprised to see the ten year closed fixed was 5.6%. I also looked at rate hub and with the exception of some of the fly by night financial places some were similar.

Is that just the big banks goofing around with posting rates that no one would ever pay ? I kind of think of fixed closed rates as a variable rate with an insurance premium. Do banks actually think there's something of a probability for the average variable rate over the next 5 years may be 5.6%?

If so, scary stuff.


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## doctrine (Sep 30, 2011)

A 10 year fixed right now at a big bank is more like 2.9%. 5 year fixed 2-2.1%. You might get a little less. Those rates on the TD calculator are not market rates.

I think it is probably that 5 year rates get back to 3% in a year or two, but unlikely to go much higher. 

It seems to me like prices should level out. Interest rates are increasing, housing construction is extremely high, and the world is opening back up, meaning people may not be interested in $5000 a month mortgages for the $1M family home as much. 

Or not, who knows, but I doubt you would have gotten a house in the last year anyway, unless you were willingly to aggressively outbid potentially dozens of people per sale.


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## birdman (Feb 12, 2013)

potato69 said:


> I bet on the housing bubble and lost. Although I've done reasonably well investing in the globally diversified index portfolio while renting I sure didn't make even close to as much as I would have from buying anything or anywhere in Canada (barring AB I suppose).
> 
> So I'm stuck at what to do at this point. Of course I want to buy a house just because renting condo's sucks and the kind of house that I want to live in isn't really available as a rental (I'm in victoria). Anyway, I feel paralized.
> 
> ...





potato69 said:


> I bet on the housing bubble and lost. Although I've done reasonably well investing in the globally diversified index portfolio while renting I sure didn't make even close to as much as I would have from buying anything or anywhere in Canada (barring AB I suppose).
> 
> So I'm stuck at what to do at this point. Of course I want to buy a house just because renting condo's sucks and the kind of house that I want to live in isn't really available as a rental (I'm in victoria). Anyway, I feel paralized.
> 
> ...


Well, I have been out of the business for many, many years but the spread between a mortgage and term deposits (maximum 5 yrs) is normally around 1-1.5% above the corresponding GIC rate. The F/I for the most part matches the maturities of term deposits to that of mortgages. Its very complicated and often involves the use of interest rate swaps and other hedging tools to ensure the maturities are matched. The lenders also have to consider and prepayments borrowers may make. If the borrower pays off their mortgage early it is subject to the greater of a 3 mos interest penalty or the interest rate differential (IRD) between the borrowers rate and the current rate. However, this IRD only applies to the firs 60 mos of a mortgage. Accordingly, the F/I carries the interest rate risk on mortgages over 5 yrs. Accordingly, F/I's either do not offer them, assume the interest rate risk but charge a premium rate, perhaps find an alternative way to hedge the risk. 
This link may help:








When a 10-Year Mortgage Term Isn’t So Bad


Earlier this year, Bank of Canada Governor Stephen Poloz discussed the need for mortgages longer than five years. Based on volumes to date, Poloz's comments moved the needle only slightly in terms of 10-year fixed popularity.




www.ratespy.com


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## Mortgage u/w (Feb 6, 2014)

Banks have always posted fictitious and absurd mortgage rates. The reason is simple - these are the rates they use to calculate their penalties once someone breaks their mortgage term.

These posted rates have no insight on the future of mortgages and their interest rates. Want a better indicator: follow the Bank of Canada bond rates and overnight lending rates.


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