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Historically, the Bond Market has been an indicator of economic strength. Typically, longer term debt pays out more than short term debt. So, when the outlook for the short term looks better than the long term, it’s taken as a sign of economic trouble ahead. It’s called the inverted yield curve and that’s what forecasters are looking at these days. The somewhat pessimistic outlook is fueled by continuing trade tensions as well as an overall moderation of global economic growth.
This cautious economic viewpoint has benefitted borrowers, as Fixed Rate Mortgages take their cues from the Bond Market. Over the summer, we’ve seen the Government of Canada Bond interest rates trending at or below the Bank of Canada Benchmark Rate, which means that Canadians could get a lower mortgage interest rate by locking into a fixed Rate Mortgage, rather than choosing a Variable Rate Mortgage. For borrowers wondering if they should lock-in a Fixed Rate Mortgage, now may be an ideal time.
Source: Bank of Canada