Regarding Current Mortgage Interest Rates
Feb.04, 2008 by Camilo Rodriguez under Mortgages
- The U.S. Federal Reserve has cut interest rates by 1.25% in the previous 2 weeks. And they may cut rates a little more. The Bank of Canada also has cut interest rates by 0.25% and again most banks are predicting further cuts will come.
- When The Bank of Canada cut rates means that the ‘Prime’ bank rate also is reduced. This affects mortgage holders of variable interest rate mortgages and Home Equity Lines of Credit that are linked to ‘Prime’ lending rates. Fixed mortgage holders are unaffected since their interest rates are fixed. Also there is no correlation between prime rate and ex. 5 year term rates.
- 5 year mortgage term rates are related to 5 year bond yields. The ’spread’ between these 2 rates affect the future direction of mortgage rates. If the spread is too big there is a tendency for 5 year mortgage rates to adjust downwards. If the spread is too low, the opposite occurs. As of today, the tendency on 5 year mortgage rates is downwards.
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