June 20, 20263 min read
Homebuyers often hear a rule of thumb, but prime mortgage underwriting is more detailed than that. Canadian mortgage rates are influenced by market funding costs, Bank of Canada policy, bond yields, competition, lender risk and the characteristics of the mortgage itself.
Where borrowers get tripped up
Here is what matters most:
- Variable mortgage rates are generally tied to a lender's prime rate, which tends to move with changes in the Bank of Canada policy rate.
- Fixed mortgage pricing is more closely influenced by bond-market yields and lenders' funding costs than by a simple one-for-one relationship with the overnight rate.
- Lenders also price for risk, capital, operating costs and competitive strategy.
- Borrower and property details can determine which rate tier is actually available.
Understanding the drivers helps explain why fixed rates can move even when the Bank of Canada leaves its policy rate unchanged.
Want this applied to your own numbers?
Call Phil Cragg at 866-349-4915 or request a written comparison.
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