Some travellers wear masks at Toronto Pearson International Airport on Saturday as the coronavirus spreads worldwide. A mortgage expert says five-year fixed mortgage rates could drop by 15 basis points due to coronavirus concerns.are being felt on Canada’s bond market, which is translating into lower mortgage rates.
Variable-rate mortgages are generally tied to the Bank of Canada’s overnight benchmark rate. Their fixed-rate counterparts depend on the five-year Government of Canada bond yield, which fluctuates with market forces. It’s fallen sharply since the coronavirus first surfaced. “Fears of a possible coronavirus pandemic are sweeping the world,” said Scotiabank economists Rebekah Young and Nikita Perevalov in a research note.When investors are fearful about global events and an economic slowdown, they tend to buy more government-backed bonds, often called safe-haven assets. This leads to something of a seesaw effect.“When investors rush to buy bonds, bond prices go up, which pushes down bond yields. Lower bond yields drive down fixed-mortgage funding costs for lenders.
McLister said RBC cut its discounted special offer and discretionary rates, but hasn’t cut its posted rate. He expects other banks to follow RBC’s lead.
“This estimate is subject to a significant degree of uncertainty with risks skewed to a potentially larger impact.”