Understanding Mortgage Rates Like a Pro

One of the most important things I do — whether you’re buying your first home, refinancing, or renewing — is help you make informed, confident decisions about not only your property, but also your mortgage options. A key part of that is understanding why mortgage rates move the way they do.

Here's a simple breakdown of what really drives fixed and variable mortgage rates in Canada, and how you can monitor them like a pro.

🔍 What Influences Mortgage Rates?

✔ Variable Mortgage Rates
These are tied to the Bank of Canada’s overnight rate. Right now, that rate is 2.75%, and banks typically add about 2.45% to it, which gives you the prime rate (currently ~5.20%).
Lenders often offer a discount off prime — for example, prime minus 1% — which brings your mortgage rate into the low 4% range.

✔ Fixed Mortgage Rates
Fixed rates are based on Government of Canada bond yields, especially the 5-year bond yield.
As of today, the 5-year yield is 2.98%, and lenders usually add a margin of 1.2% to 1.6% to that to cover their costs and profit — so you can expect 5-year fixed mortgage rates around 4.2% to 4.6%.

💡 A Look Behind the Curtain: How Much Do Lenders Make?

If a lender offers you a 5-year fixed rate at 4.09%, but their cost of funds is 2.89%, they’re making a spread of about 1.20% per year.

Over a 5-year term on a $500,000 mortgage, this could translate into around $18,400 in profit — assuming you hold the mortgage to maturity.

🛠 How to Monitor the Key Rates Yourself:

• Bank of Canada Overnight Rate (affects variable rates):
  ➤ https://www.bankofcanada.ca/core-functions/monetary-policy/key-interest-rate/

• 5-Year Government of Canada Bond Yield (affects fixed rates):
  ➤ https://www.bankofcanada.ca/rates/interest-rates/lookup-bond-yields/

Watching these two numbers can help you spot trends and feel more prepared when you’re making mortgage decisions — especially in this shifting rate environment.

If you'd like me to walk you through current mortgage options — or how these indicators might affect your situation — just reply to this email or book a quick call with me here: [Insert Calendly link or contact info].

I'm here to simplify the process and help you get the best outcome possible.