Lower than five years fixed rate mortgages are being pushed more by the banks. The bond yields are lower on the shorter durations therefore banks get more leverage on the rate side.
Rate and Yield Indicators:
Another indicator can be the GCI rates. If you look at the current GIC rates offered by the banks are higher than what were being offered in the beginning of 2012. Note: in 2011 they were higher but the market went down in the last winter.
We lack the expertise in GIC’s and other financial investments – we can’t be sure - but it appears that a positive outlook on yield exists in the market.
If you feel that the rates would go up in the future then what would you do? Probably you would think about taking short term steps now so that your investments are not stuck for long term. It is just a simple logic but the lenders are probably thinking the same way.
Bond Yields – Touching the Bottom?
If you look at the last ten years bond yield then you shall see that the low trends did not last this long. The lower yield has been taking longer to recover in this cycle. Apart from that fact it appears that we have pretty much hit the bottom.
A bank has overheads and it can only go down to some extent. Lowering rate can never last for ever as the lenders would not survive a negative yield on an investment.
Whatever the case is, we cannot ignore the external factors other than pure economics. Politics is the biggest of all. If real estate falls then a lot will get hit. It may become a political problem; therefore we shall see political interference to maintain the low rate.
Bottom line is that we can never be sure but the market appears to be optimistic abut the future.