BC Canada Fixed or Closed Mortgage Rate & How does it work
Fixed-Term & Closed Mortgage Rates in BC & Canada, such as long-term mortgage rates, by contrast, are based on the bond market. Basically, a bond is a debt with a promise to repay the loan, along with interest. Bonds are issued by governments and large businesses. The "yield" of the bond is the annual rate of return, expressed as a percentage. Bond yields can be volatile and fluctuate in response to various political and economic factors, such as inflation and unemployment figures, and developments in the stock markets. They are increasingly affected by global forces. Long-term mortgage rates (3 years and longer) are based on bond yields, but are less volatile because financial institutions absorb the daily market fluctuations in order to create a more stable rate environment for their customers. Generally speaking, higher bond yields increase funding costs for banks, which in turn leads to increased long-term fixed rates. Conversely, lower bond yields lower banks' funding costs and lead to lower long-term mortgage rates.
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