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How Low Can Yields Go? The 5-year government yield is doing the limbo, and the bar keeps being lowered. It closed Friday at 1.35%. How low it goes depends on how bad things get economically—and how bad investors think things will get. It’s interesting to contrast Canada to other countries because our yields are still notably higher than many. That’s despite a relatively stable fiscal and economic outlook. Here’s a sampling of 5-year yields from around the globe, including each country’s debt-to-GDP and unemployment rates (UR): Canada: 1.35% (Debt/GDP: 36%; UR: 7.3%) U.K.: 1.32% (Debt/GDP: 86%; UR: 7.8%) Germany: 0.91% (Debt/GDP: 44%; UR: 6.1%) U.S.: 0.87% (Debt/GDP: 61%; UR: 9.1%) Switzerland: 0.38% (Debt/GDP: 20%; UR: 3.9%) Japan: 0.35% (Debt/GDP: 183%; UR: 4.7%) Economically, these other countries don’t compare cleanly to Canada, but they do have a few things in common: Each is being impacted by the same worldwide trends (including a global slowdown and flight-to-saf

The Bank of Canada Qualifying Rate has decreased to 5.19%, effective Monday Sept. 26, 2011 http://www.christinebuemann.com/

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Fixed rate mortgages closing the gap on variable rate, says BMOEconomics While historic trends favour variable, the current interestrate environment makes it a much closer call than ever By IE Staff With interest rates hovering near record lows, many Canadian home buyers are grappling with the age-old question of whether to choose a fixed or variable rate mortgage. “With short-term rates now likely to stay at very low levels, and long-term rates testing record lows, whether to lock into a longer-term fixed mortgage rate or choose a variable rate continues to be a hot-button issue among home buyers,” says Benjamin Reitzes, senior economist, BMO Economics. Historically, research shows that there is little debate as to which has been the better option for homebuyers. Typically, borrowers save money by staying in variable products, and riding the rollercoaster of fluctuating rates. In fact, since 1975 the cost-effective route for borrowers was to stay variable 83% of

A common misconception about variable rates is the process of “locking your rate in”. A more accurate description would be to “convert it to a fixed rate mortgage”. Although every lender has different policies surrounding their variable rate products, most will allow you to “lock in your rate”. This generally means that you can convert it to a fixed rate mortgage that is equal to or longer than the amount of time that you have remaining on your current term. Here are a few facts on the Major 6 Banks in Canada and how they decide what discount to give you off of the posted rate (ex. 5 year posted rate today is 5.39%): TD Canada Trust: Discretion is decided by loan officer based on how strong they feel your relationship is with the bank. 1% off posted is guaranteed in year one. CIBC: The discount originally offered on your variable rate mortgage (VRM) is what will be applied to their fixed posted rates. Scotia Bank: Discretion is decided by loan officer based on how strong they f

Jeremy Torobin OTTAWA— Globe and Mail Update Sep 7, 2011 - 8:19:36 AM Bank of Canada Governor Mark Carney held his benchmark interest rate at 1 per cent Wednesday and suggested his year-long pause will last much longer as a bleaker outlook for the global economy quashes any urgency to make it harder to borrow and spend. In explaining the decision to leave borrowing costs alone for an eighth meeting, as expected, the central bank said it believes Canada’se economy is growing again after stalling in the second quarter, but painted a troubling picture for the United States and Europe, and said exports will be a “major source of weakness.” “In light of slowing global economic momentum and heightened financial uncertainty, the need to withdraw monetary policy stimulus has diminished,” the central bank said. “The Bank will continue to monitor carefully economic and financial developments in the Canadian and global economies, together with the evolution of risks, and set monetary pol

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