A slight downturn in mortgage rates shouldn’t send prospective buyers into a tailspin, according to a Lower Mainland Royal LePage advisor.
At least two of the country’s main banks, the Royal Bank of Canada and the Bank of Montreal, lowered their five-year fixed mortgage rates this week.
Adil Dinani said the fixed rate depends on bond yields, and “when the bond yield goes down, rates go down.”
The Bank of Montreal dropped its rate by 0.15, down to 3.74 per cent.
“It’s so marginal that it doesn’t really have a material impact on how much money they’re going to lend or how many people buy homes,” said Dinani.
But it does is a “psychological effect,” he said, as some homeowners look to swap from variable rates to fixed ones.
The reason behind the potential swaps is that variable rates are affected by the Bank of Canada prime rate, which has gone up 1.25 per cent in the past year and a half.
Fixed rates are unaffected by that and are instead tied to the bond market.
In general, Dinani said, the lowered fixed rates is another sign of a market cooldown after a hot decade in real estate.
“The market needs some good news, particularly in Vancouver,” he said. “We’ve had tremendous run-ups in our market since 2009 that a cooling period now is very welcome.”