Why Do Mortgage Rates Change?

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Why Do Mortgage Rates Change?
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• Influencing the health of the economy are many
  factors, from unemployment and inflation, to
  consumer confidence and the housing market, and
  any number of these, when combined, can also
  influence fixed and variable mortgage rates.
• Factors that can have an impact upon fixed
  mortgage rates
• Government of Canada bond yields - perhaps the
  most significant factor that affects fixed rate
  mortgages is the Government of Canada bond
  yields mortgages with fixed rates generally move
  in alignment with government bond yields of the
  same term.

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• Bond prices and bond yields (negative
  relationship) bond prices have a negative
  relationship with bond yields, meaning that when
  bond prices go up, bond yields go down, and when
  bond prices decrease, bond yields go up. Usually
  considered to be a safer investment than stocks,
  Government bonds in particular typically go down
  when the economy is thriving, and then decrease
  when the market dips again.
• Bond yields and fixed rates (positive
  relationship) Commonly, fixed rates have a
  positive relationship with bond yields and go up
  and down along with them bond yields increase,
  fixed rates increase and follow the same pattern
  when bond yields decrease.

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• When the stock market is doing well anyone
  investing in equities (ie the stock market), is
  much more likely to make a higher return on their
  investment when the stock market is doing well,
  in comparison to investing in bonds, driving
  demand for bonds. This then means that the price
  of bonds goes down, and bond yield subsequently
  increases. When this happens, fixed rates are
  likely to increase, too.
• When the stock market isnt doing well when
  stocks are not such a healthy prospect, on the
  other hand, investors are far more likely to make
  safer investments, such as bonds, and their
  demand subsequently rises, while their yield
  decreases. As a direct result of this, fixed
  rates will likely go down.

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• Factors that can have an impact upon variable
  mortgage rates
• The Bank of Canada determining the target
  overnight lending rate, the Bank of Canada is
  responsible for changes to variable rates.
• The overnight rate Changing the cost of lending
  and borrowing short-term funds, and influencing
  the Prime Rate as a result, the overnight rate is
  linked to variable mortgage rates and when the
  prime rate goes up, so do variable mortgage rates
  and monthly payments.

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• Prime /- - advertised as prime plus or minus X,
  variable mortgage rates mean that the interest
  rate you pay, is directly linked to the prime
  rate and will go up and down as and when this
  changes.
• While there are many factors that can affect a
  mortgage rate, when you work with a qualified and
  professional mortgage broker, they will help you
  to navigate the murky economical waters to select
  a rate that is most likely to work well for you
  given the current situation, while taking any
  predictable market fluctuations into account.

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