What is the difference between interest rates and bond yields?
 January 8 2016     Posted by Siemens Group

As many of you have heard through our rate updates, the bond yields have been climbing for the past several weeks. This trend is said to stay so it is a fantastic time to devise a long term approach to your mortgage debt. Once again I will differentiate between interest rates and bond yields... interest rates are set by the Bank of Canada through the overnight rate. Bond yields change daily through the open market. As bond yields rise the cost of borrowing fixed term mortgage (mid-long term) also rises. We have been very low for a long time but now the bond traders have indicated it is time for a paradigm shift.

We are entering a period of sustained bond yield increases, they will likely be small but overtime the trend will continue.

Perhaps you have reviewed your mortgage option over the past year or so. Perhaps the penalty was far too high for you to benefit from the low rates of our current market. One strategy is to be pre approved for a rate for 120 days and then watch as the rates increase, this could very well cause your penalty to drop into a range that makes it worth breaking your current contract.

Take a look at the mortgage you owe, talk about your plans for the next 5-10 years and then decide how long it will take to retire your debt. Develop a plan on how pay off your mortgage so that affordability will not be a factor with rising rates.

Should you wish to create a plan for your mortgage debt give us a call today and we will be happy to create a plan to take you through the next 5-10 years.