Travellers are spotted wearing masks at Toronto Pearson International Airport on Saturday as the coronavirus spreads worldwide. A mortgage expert says five-year fixed mortgage rates could drop by 15 basis points due to coronavirus concerns.are being felt on Canada’s bond market, which is translating into lower mortgage rates.
Variable-rate mortgages are generally tied to the Bank of Canada’s overnight benchmark rate. Their fixed-rate counterparts depend on the five-year Government of Canada bond yield, which fluctuates with market forces. It’s fallen sharply since the coronavirus first surfaced. “Fears of a possible coronavirus pandemic are sweeping the world,” said Scotiabank economists Rebekah Young and Nikita Perevalov in a research note.When investors are fearful about global events and an economic slowdown, they tend to buy more government-backed bonds, often called safe-haven assets. This leads to something of a see-saw effect.“When investors rush to buy bonds, bond prices go up, which pushes down bond yields. Lower bond yields drive down fixed-mortgage funding costs for lenders.
McLister said RBC cut its discounted special offer and discretionary rates, but hasn’t cut its posted rate. He expects other banks to follow RBC’s lead.