Financial fluctuations with global economic conditions

Interest rates have been very interesting to watch over the past few years and they’ve not disappointed as of late either.

Government bonds have recently been dancing around all time lows, and these bonds are essentially what price the fixed interest rates at the banks and mortgage lenders.

Even though the bond rate is hitting record lows right now, banks usually follow with either a drop or an increase.

But the banks haven’t let up for about six weeks now. The bond rate has been hovering around the 1.35-1.55 level for the past five to six weeks and lenders have been providing interest rates in the 3.29-3.59 range.

Because of competition, lenders and banks typically have a yield of about 1.20-1.60% above the bond rate, which means that we should be at the 2.55-3.15 range for five-year fixed rates. But there’s a lot of uncertainty out there with regards to the Eurozone debt crisis’, the United State’s puttering economy and China’s first sign of a slowing economy from their second quarter releases.

There’s another problem out in the deposit taking world – the banks that don’t borrow their money from the government to lend out to the consumer. Deposit taking banks (think RBC, TD, ATB etc. and credit unions) are currently giving consumers 2.50%-3.35% for their large deposits but in this current environment are lending it out at almost the same rate that they are taking it in.

This doesn’t pose well for the banks’ bottom line as there’s no profit in lending the money out at the same price one takes it in. My guess is that even though they are lending it out for even money, they will have to be more aggressive with marketing all of their products to those consumers once they have them on the balance sheets.

When you put all of that together lenders aren’t as trigger happy as they’ve shown in recent past rate drops.

But if these bond rates do persist at these same levels then we should be seeing further rate drops, but alternatively if there’s any positive news in the global economy then look for a spike in the bond rate and thus a quick increase to mortgage rates. Gravity doesn’t apply to interest rates, they rise faster then they fall.

Jean-Guy Turcotte is an Accredited Mortgage Professional with Dominion Lending Centres-Regional Mortgage Group and can be contacted for appointments at 403-343-1125 texted to 403-391-2552 or emailed to jturcotte@regionalmortgage.ca.

Just Posted

Red Deer’s newest outdoor ice facility opens to the public this week

The speed skating oval at Setters Place at Great Chief Park will be open Dec. 17th

Yellow Vests protestors take to Red Deer streets

Trudeau government’s immigration and oil industry policies denounced at rally

Rebels lose to Medicine Hat Tigers, 4-1

Tigers break Rebels’ three-game winning streak

Exhibition explores the rich history and culture of Métis people

The exhibition is on display from Dec. 15th to March 10th at the Red Deer Museum + Art Gallery

2019 Hockey Alberta Provincial Championship host sites announced

A total of 39 Provincial Championships will be hosted across the province

Trudeau to make it harder for future PM to reverse Senate reforms

Of the 105 current senators, 54 are now independents who have banded together in Independent Senators’ Group

Trudeau lashes out at Conservatives over migration “misinformation”

Warning against the “dangers of populism,” Trudeau says using immigration as a wedge political issue puts Canada’s future at risk.

B.C. hockey coach creates ‘gear library’ to remove cost barrier of sport

Todd Hickling gathered donations and used gear to remove the cost barrier for kids to play hockey.

Canada’s ambassador meets with second detainee in China

Global Affairs says John McCallum, Canada’s ambassador to China, met with Spavor Sunday

‘They’re coming:’ Flying cars may appear in urban skies by 2023

Air taxis will number 15,000 and become a global market worth $32 billion by 2035

World Sikh Organization demands Canada prove Sikh extremism is a threat

Sikh community says this is first time such extremism has been mentioned in federal terror-threat assessment

Light at the end of the tunnel for UN climate talks

Meeting in Katowice was meant to finalize how countries report their emissions of greenhouses gases

Supreme Court affirms privacy rights for Canadians who share a computer

Section 8 of the Charter of Rights and Freedoms protects Canadians against unreasonable search and seizure

Janet Jackson, Def Leppard, Nicks join Rock Hall of Fame

Radiohead, the Cure, Roxy Music and the Zombies will also be ushered in at the 34th induction ceremony

Most Read