How The Vaccination Race Is Affecting Mortgage Rates

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How The Vaccination Race Is Affecting Mortgage
Rates
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• With Canadian mortgage rates at an all-time low,
  questions are being asked as to just how long
  theyll remain that way, and what factors will
  affect it the most. Undoubtedly at the moment,
  the COVID-19 vaccination race and their earlier
  than anticipated arrival, paints a reasonably
  optimistic economic forecast. The ongoing
  lockdown continues to hamper the economy, making
  vaccination rates vital, and the race to achieve
  herd immunity, an ever more desperate one.
• Currently, the federal government is promising a
  vaccine by September for every Canadian citizen
  wanting one, and hitting this target could prove
  crucial for mortgage rates and the economy in
  general.

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• The vaccination race and variable mortgage rates
• Priced on lender prime rates that move in line
  with the Bank of Canadas policy rate, variable
  mortgage rates are currently at 0.25, after the
  bank dramatically cut its policy rate in March
  2020 at the beginning of the pandemic - by
  1.50. Then, in July of 2020, the bank took the
  unusual step of confirming that it wouldnt raise
  its policy rate until an unconfirmed date in
  2023, and has repeated this guidance frequently,
  since.

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• The current state of fixed mortgage rates
• Priced on Government of Canada bond yields, while
  not directly tied to the Bank of Canadas policy
  rate, they do respond to changes in the banks
  outlook, and under normal times, fixed mortgage
  rates are only influenced by the BoC indirectly.
  However, with the current times being far from
  normal, the Bank was reducing rates and offering
  unprecedented forward guidance, while also using
  quantitative easing (QE) programs to buy at least
  4 billion worth of government debt each week.
  Those QE purchases are now focused on the
  government bonds most important to households and
  businesses, and have included large quantities of
  the five-year GoC bond, which five-year fixed
  mortgages are priced on.

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• Helping to suppress GoC bond yields, at least for
  the time being, it has also helped to suppress
  our fixed mortgage rates.
• Once the BoC feels that an economic recovery is
  on the horizon, it will begin to taper its QE
  purchases, and its anticipated that when this
  happens, government bond yields and fixed
  mortgage rates, will rise responsively.
• It seems likely that any changes in the outlook
  of the BoC will have an impact on fixed mortgage
  rates, before they impact variable rates.

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• The continuing vaccination race
• If forecasts made by the Bank of Canada are
  underpinned by the governments scheduled
  vaccination timeline, then keeping a close eye on
  actual vaccination rates in accordance with the
  schedule, should provide us with useful insights
  into the countrys economic momentum and how its
  lining up against the banks projections. With two
  vaccines having now been approved and in the
  throes of being distributed, other vaccines are
  in hot pursuit. Canadian homebuyers are advised
  to seek advice and guidance from a mortgage
  broker who will be keeping a close eye on the
  ongoing pandemic and vaccination race.

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