Bond yields spark another round of rate hikes

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The five-year bond yield hit a four-year high Thursday, rising 4.18 per cent to 2.15 and signalling a coming interest rate hike, report brokers.

“Emails are flying from lenders that there will be yet another round of rate hikes,” Ron Butler of Verico Butler Mortgage told

Another leading broker believes lenders have already planned with the bond yield increase in mind.

“I think some of the lenders are already compensating for that: This morning I received emails from lenders saying they were going to raise their rates,” Lior Hershkovitz of Mortgage Edge told “It’s going up 10-15 basis points and right now we’re at 3.9 per cent with a lot of lenders and I think TD is at 3.79, which will probably go up to 3.99 per cent.”

This may be an opportunity for certain lenders to gain a competitive advantage over the competition – at least in the short term. Some may, in fact, be counting on that.

"I’m wondering if some monolines are holding their rates back for a competitive advantage for now,” Hershkovitz said. “I could see the banks offering special rates as well. “

With the United States continuing to claw its way out of the recession, interest rates are expected to continue to increase – though it may be too early to lament the death of low fixed rates north of the border.

“Is it a continued long-term development? I don’t know,” Hershkovitz mused. “They say it’s because the U.S. economy is improving and I think it’s being blown out of proportion when people call it the end of low interest rates.

As long as five-year fixed rates remain below five per cent, said Hershkovitz, "it’s still a bargain because if you look at the average in the last 10-20 years, that’s where a five year rate should be.

"Just because we had ultra-low interest rates for a while, these (increases) seem like huge interest rates.”

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