- Joined
- Jan 22, 2008
- Messages
- 9
Hello I was wondering what the usual % difference is between a Fixed(Bonds) morgage and a Variable morgage(Prime). What relation do they have to each other. If Prime goes down do bonds go down as well?
Bond vs Prime
- Thread starter TimUnsworth
- Start date
- Joined
- Oct 16, 2007
- Messages
- 758
Hi Tim,
The bond and the prime rate actually are independent of one another. The bond rate fluctuates based on the demand and supply in the investors markets. The banks, finance companies, and mortgage companies based their mortgage pricing on the cost of funds. The cost is typically the 5 year bond rate plus the applicable spread. It`s this spread that`s been interesting over the last couple of months.
The prime rate is based on the Bank of Canada`s overnight lending rate. The prime rate will move with changes to The Bank of Canada`s desicions based on the effects of inflation and the overall economy. The rate can be increased to slow inflation and halt the economy, and can be decreased to increase the overall economy.
I would recommend searching this site for informaiton from Benjamin Tal at CIBC. He`s been a presenter at REIN and he`s who we rely on for the most up to date and accurate information.
The bond and the prime rate actually are independent of one another. The bond rate fluctuates based on the demand and supply in the investors markets. The banks, finance companies, and mortgage companies based their mortgage pricing on the cost of funds. The cost is typically the 5 year bond rate plus the applicable spread. It`s this spread that`s been interesting over the last couple of months.
The prime rate is based on the Bank of Canada`s overnight lending rate. The prime rate will move with changes to The Bank of Canada`s desicions based on the effects of inflation and the overall economy. The rate can be increased to slow inflation and halt the economy, and can be decreased to increase the overall economy.
I would recommend searching this site for informaiton from Benjamin Tal at CIBC. He`s been a presenter at REIN and he`s who we rely on for the most up to date and accurate information.