Tuesday, November 15, 2016

Trump Effect: Expect Higher Mortgage Rates

Towards the end of the election campaign, President-elect Donald Trump was quite critical of the current low rates. He has also indicated that he would replace the current US Federal Reserve Chairwoman Janet Yellen. After he won the election, yields have reacted according to Trump’s suggestion, and a bond market sell-off has moved bond yields higher.  At the same time, equities have benefitted as capital has moved into US stocks, driving the Dow Jones Industrial Average Index into record territory. Canadian government 5-year bond yield has also jumped 25 basis points to 0.96% since the U.S. election.

The rise in interest rates has lifted bank stocks in the U.S. and Canada with some stocks going up by 5% and more daily. The borrowers are currently bracing for the impact of higher interest rates. In his article this week in the Globe and Mail, Rob Carrick provides advice from mortgage brokers to lock in a five-year fixed rate mortgage as soon as possible. Higher interest rates and newly imposed government regulations may cool down southern Ontario’s housing market in the foreseeable future.

Ukrainian Credit Union Limited

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