Leading the Toronto mortgage radar this week is news about the increase of 5 year fixed rate mortgages. Fixed rate mortgages are priced according to 5 year bond yields and have a positive relationship. Meaning that if bond yields increase then fixed rate mortgages have a tendency to increase as well and vise versa. The market forces at play that influence bond yields are a bit more complex but this article from The Toronto Star gives a good over view for the casual reader. Despite the increase I don’t believe that this is the end of low fixed rate mortgages, as there still remains too much uncertainty about the global economic recovery and demand for Canadian mortgage backed securities remains high.
On the note of recovery and an article that ties in nicely with last week’s Toronto mortgage Radar about the “new credit crisis“, Gary Shilling, economist and author of “The Age Of Deleveraging” highlights his theory of Why The Feds Plan Won’t Work.
Gary’s theory is that the traditional monetary policy of the fed or
Bank of Canada to make money cheaper to encourage us to spend our way
out of recession won’t work because this is what he call’s a