With the bond market yields tumbling, there is potential room for further mortgage rate cuts in what is already a competitive market.
Banks and other lenders have been reacting to conditions prompted by the coronavirus outbreak, with RateSpy.com founder Rob McLister saying it’s “raining rate cuts” currently with many lenders cutting fixed rates.
Speaking to BNN Bloomberg this week, he said the last time he saw a similar volume of rate changes was in 2017 when the Bank of Canada hiked rates.
He believes that the falling bond yields should give banks room to offer further mortgage rate cuts, but he also warned that there is a chance that the cuts could “slow significantly” – or even rise - if the risk premium that banks price in to their lending rises.
McLister said that he was not predicting or expecting this, but it could happen, even though the bond yields are lower.
HELOCs and other lines of credits could also potentially be tightened, but again McLister does not expect this.
Banks have been acting to shore up their finances including increased liquidity buffers in recent days.
With the falling oil prices adding extra risk to the economies of Canada’s oil producing provinces, McLister said there would be some tightening of credit.
That is likely to mean borrowers in provinces such as Alberta and Saskatchewan facing lower LTV ratios or even a freeze on uninsured mortgages.