Is Your Mortgage Lender About To Go Bust?
May 1, 2017Should You Choose a Fixed or Variable Mortgage Rate Today?
May 15, 2017
Today’s post will be shorter than normal because I was in Vancouver on a mini-vacation this past weekend.
We received the latest Canadian and U.S. employment data last week.
The Canadian economy added only 3,200 new jobs last month, which was below the 10,000 new jobs that the consensus had been expecting. While the latest headline number disappointed, the long-term trends for our job growth are still robust (we have averaged 22,000 new jobs over the past twelve months).
South of the border, the U.S. economy added an estimated 211,000 new jobs, which was higher than the consensus estimate of 190,000. The details in the latest U.S. Non-farm Payroll report were more encouraging than those seen in the March report, which disappointed. Market watchers were anxious to see if the March weakness would flow through to April and that did not happen. The U.S. job-creation engine cranked back in to high gear, although it’s not clear how long that will remain the case with U.S. GDP growth weakening.
The lack of wage growth in both countries continues to confound policy makers on both sides of the 49th parallel. While the quantity of jobs is consistent with the healthy labour market, the quality is not, and gives both the Bank of Canada (BoC) and the U.S. Federal Reserve pause when deciding how best to position monetary policy going forward.
Five-year Government of Canada bond yields fell three basis points this week, closing at 0.98% on Friday. Five-year fixed-rate mortgages are available at rates as low as 2.39% for high-ratio buyers, and at rates as low as 2.44% for low-ratio buyers. If you are looking to refinance, you should be able to find five-year fixed rates in the 2.64% to 2.79% range, depending on the terms and conditions that are important to you.
Five-year variable-rate mortgages are available at rates as low as prime minus 0.80% (1.90% today) for high-ratio buyers, and at rates as low as prime minus 0.70% (2.00% today) for low-ratio buyers. If you are looking to refinance, you should be able to find five-year variable rates in the prime minus 0.45% range (2.25% today), depending on the terms and conditions that are important to you.
The Bottom Line: While the latest U.S. employment data were encouraging, the Fed must still reconcile the strength in the quantity of new jobs with tepid average wage growth and slowing overall U.S. economic momentum if it wants to continue hiking its policy rate this summer, as is expected. Meanwhile, the weak Canadian employment data in April support the BoC’s current “wait and see” monetary-policy approach. As such, for the time being it’s steady as she goes for both our fixed and variable mortgage rates.