Rising Mortgage Rates or Rising Interest Rates ?

What do news headlines below tell us ?

Higher bond yields trigger hike in mortgage rates

Toronto Star – ‎Jun 21, 2013‎
The recent increase in mortgage rates by several of Canada’s big banks is likely the start of a slow upward trend, experts say. Scotiabank, the Royal Bank of Canada, and TD Canada Trust raised rates this week on some mortgages for terms ranging from two 

Rising interest rates: Consumers, investors face sudden shift

Globe and Mail – ‎Jun 21, 2013‎
Royal Bank of Canada, the country’s biggest mortgage lender, has boosted its five-year rates for fixed-rate mortgages twice in the last two weeks to 3.49 per cent, and has also raised rates on mortgages of other lengths. Rival banks are following suit.

Mounting interest

The Telegram – ‎15 hours ago‎
On the other hand, when rates rise – as they did for at least one major Canadian bank, which announced increases of 0.2 per cent on several four-year and five-year mortgages on Thursday, the news release has the headline “Royal Bank announces change 

Canadian mortgage rates on the rise

Hamilton Spectator – ‎Jun 20, 2013‎
TORONTO A number of Canada’s largest banks are moving to increase some of their mortgage rates. Scotiabank and the Royal Bank of Canada on Thursday became the latest to announce a round of increases covering various terms of what they call special 

RBC Royal Bank changes residential mortgage rates

Wall Street Journal – ‎Jun 20, 2013‎
The rates indicated are special discounted rates and are not the posted rates of Royal Bank of Canada. To calculate a rate discount compare the Special Offer rate against the posted rate for the applicable term. Special Offers may be changed, withdrawn or 
So, is it Rising Mortgage Rates or Rising Interest Rates ? Which is which ?
According to Toronto Star,

Higher bond yields trigger hike in mortgage rates

Why bond yield goes up ? According to this source  http://www.thetruthaboutmortgage.com/what-causes-mortgage-interest-rates-to-move/ …

Investors LOST CONFIDENCE on the economy !

How will I know if mortgage rates are going up or down?

Typically, when bond rates (also known as the bond yield) go up, interest rates go up as well. And vice versa. Don’t confuse this with bond prices, which have an inverse relationship with interest rates.

Investors turn to bonds as a safe investment when the economic outlook is poor. When purchases of bonds increase, the associated yield falls, and so do mortgage rates. But when the economy is expected to do well, investors jump into stocks, forcing bond prices lower and pushing the yield (and mortgage rates) higher.

And according to Globe and Mail, the housing bubble is on its way because interest rate has already increased … or perhaps will be increased very substantially and very soon ?

Rising interest rates: Consumers, investors face sudden shift

But apparently that is not the case because BMO says they expect Bank of Canada to increase (interest) rate only next month …

Bank of Canada will raise overnight interest rate in July 2014: BMO economist

Toronto Star – ‎Jun 19, 2013‎
The Bank of Canada is likely to start raising its benchmark interest rate in July 2014, a full year before the U.S. Federal Reserve, BMO’s chief economist Douglas Porter said Wednesday. Porter predicts the overnight rate will go up by half a percentage point, 
Then why did ‘Fat Cat’ like RBC increase their mortgage rate ?  Why do they do that when they have no risk (mortgage risk is underwritten by taxpayers money) and they have been making so much money.
What is the rationale ?

Canadian economic outlook given bigger bounce from US recovery: RBC

Vancouver Sun – ‎Jun 19, 2013‎
Porter also says he expects the Bank of Canada will keep hold rates at one per cent for at least another year. Porter predicts the benchmark rate will go up by 50 basis points in July 2014, slightly before the Federal Res

I have no anwer except may be it’s due to the fact that Canadians just love to pay more than they should for everything … They pay more for house, car, even shampoo ! What can I say ?

According to the ‘Fat Cat”, this is becasuse Canada is doing very well … economically speaking.

Canada’s economy doing better than expected: RBC

CHCH News-Jun 20, 2013Share
RBC raised its estimate for the country’s 2013 economic growth to 1.9 per cent and says 2014 growth will be about 2.9 per cent. RBC credits the …
But then you wonder why our money ie. the Loonies is heading south ?

Loonie falls to 18-month low amid stronger greenback, weak …

CTV News-Jun 21, 2013Share
A weaker loonie tends to help sectors of the economy that sell Canadian goods and services to the United States but could make it more …

You know what ? According to our government, this is because there has been barely any inflation in Canada. However, I wonder why do we pay something like double for gasoline (compared to our southern brethren of course) … And as far as I am concerned, I used to pay something like just a quarter for one liter of gas (compared to today’s price at the pump)  … that’s not even that long ago. I say something like just a decade ago ?

Tripling in gasoline price is no inflation ? What kind of math is this one ? And this why Bank of Canada can afford to keep the interest rate at almost nothingness (and causing such a huge potential bubble in practically everything’s ie. not just housing) ?

Anyway, thank you Mr. Mark Carney. And good luck to you, Mr. England UK, you’re about to have one of the best “bubble maker” on earth, guess it won’t take very long before England is bestowed with one trillion bucks in mortgage insurance ? Maybe not … I am not aware there is anything like Fannie Mae and Freddie Mac in England, but we do, it’s called CMHC.

What’s next ?

And the one I like the best so far is this one …

“Government and their cohorts (banks) are pure HYPOCTITES !”

Mounting interest

The Telegram

It’s a funny thing: generally, when Canada’s banks issue news releases announcing plans to lower interest rates, the releases come with the headline “Bank X decreases interest rates.”

On the other hand, when rates rise – as they did for at least one major Canadian bank, which announced increases of 0.2 per cent on several four-year and five-year mortgages on Thursday, the news release has the headline “Royal Bank announces change in interest rates.”

It’s the third time the Royal Bank has increased rates, and Scotiabank followed suit Friday. A decrease is a decrease; an increase is a “change.”

Why the difference?

Like so many things in the financial world, it’s about optics.

In fact, some time in the future, historians may look back and marvel about those optics and wonder if they don’t act closer to voodoo than they do to any clear economic science.

Wednesday, the chairman of the U.S. Federal Reserve, Ben Bernanke, announced that prospects for the American economy were looking up – sounds like a good thing, especially for countries like ours that sell goods into the States, right?

Not exactly. Bernanke’s announcement was met with trepidation, not because improvements in the economy aren’t a good thing, but because those improvements mean the U.S. agency may slow or stop its efforts to prop up the economy by artificially keeping interest rates low.

The threat of an end to the current era of easy money – some of the lowest interest rates in years, for everyone from multinational companies right down to the lowly everyday residential mortgage holder – sent stock markets plunging, the currency market spinning and played havoc with commodity prices.

All that, despite the fact that Bernanke wasn’t talking about immediate change – he was talking about gradually reducing the Reserve’s efforts to buy down rates, allowing those rates to reach “normal” levels by some time in late 2014 or early 2015.

The announcement might have been for a gradual change – the results were anything but.

As far as optics go, it’s like the markets, already jittery, spent their day watching the comments through the wrong end of the fiscal telescope.

The problem, of course, is that while the optics may be strange, convoluted and far away, the effects are anything but.

Powered in part by low interest rates, housing prices on the northeast Avalon have skyrocketed. Problem is, there are a fair number of those purchases carrying mortgages that are only sustainable if interest rates stay low. The rapid growth of the homebuilding industry here is doubly dependent on low rates: in the first place, to finance the construction of new homes, and in the second, to provide the financial backing for purchasers to buy those new properties. (With optics such a crucially important part of the business, it’s no wonder that anyone in the business will tell you that everything’s fantastic, regardless of their own legitimate and private fears.)

Remember at the beginning of this editorial, when we said “it’s a funny thing”?

Get ready: there may be nothing funny about the next interest rate cycle at all.

Some people insist change is a good thing, but when it’s banks talking, it might be anything but.

O Canada

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