Why You Should Get a Pre-Approval. Now.

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rates going upOne of the things that we're constantly doing here at First Foundation is monitoring mortgage rates for our clients. After all, it's the single most important feature of a mortgage for many people, as it most directly affects the cost of the mortgage over time and whether or not someone qualifies.

What many Albertans don't realize is that not all interest rates are directly linked to the Prime Rate of Interest, or Prime for short. Many people intuitively understand that variable rate mortgages rise and fall with Prime, but did you know that fixed rates are more directly linked to bond yields?

While the Bank of Canada only meets and sets rates eight times a year, the bond market is a living, breathing, real-time market that adjusts constantly. When the bond market needs to attract more capital, prices go down and yields go up. When there's lots of demand for bonds, prices go up and yields go down. Fixed interest rates rise and fall with yields in more or less direct correlation. For that reason, if you want to be able to predict, or try to predict, interest rate pricing pressures, you want to watch bond yields.

These are substantial increases...

From the previous link you can see that the 5-year bond yield has gone up 37.5 basis points in the past four weeks - from .760% to 1.135%, and the long-term 10-year yield has gone up almost half a percent from 1.34% to 1.823%. These are substantial increases which could lead to rate increases very soon. Competitive pressures aside, lenders only have so much ability to withstand cost increases of that nature for so long before they have to increase their prices. If you're thining about buying a home anytime in the next 120 days, you can lock in a rate with a pre-approval from one of our approved lenders and protect yourself against the potential increase. Not only will you potentially save some money, but you'll understand why.


President of First Foundation Residential Mortgages and First Foundation Insurance. Live in Edmonton but cheer for the Riders. I have lots of kids. Follow me on Twitter @gordmccallum

Learn more about Gordon McCallum