Mortgage hunters get temporary reprieve

The Greek debt crisis has led to an unexpected — but likely brief — dip in fixed mortgage rates at most Canadian banks.

The rate for the popular five-year fixed closed mortgage is down 0.15 percentage points to 6.10 per cent at all of the big five banks Tuesday.

That’s the posted rate. Most banks also dropped the benchmark rate for their discounted five-year mortgage by a similar amount to 4.70 per cent. Some online and smaller lenders charge less.

That’s a welcome change for mortgage shoppers who’ve seen fixed rates rise by more than a full percentage point in the last month.

The latest drop started last Friday, when TD Canada Trust and Bank of Montreal both announced similar trims. The other banks followed Monday, with their cuts effective Tuesday.

Longer-term fixed mortgage rates typically follow longer-term bond yields. The Greek debt crisis put a stop to rising bond yields as traders moved money out of risky assets.

“Both treasuries and Government of Canada bonds have recently benefited from a flight to quality on the back of renewed sovereign debt concerns in Greece and other parts of Europe,” CIBC World Markets noted in a recent commentary.

Many mortgage experts say the pause is just temporary and note that bond yields are already edging higher as the EU’s bailout package eases Greek default concerns.

Variable mortgage rates are tied to the Bank of Canada’s overnight lending rate. After recent healthy signals coming from various sectors of the Canadian economy, including last Friday’s unexpectedly strong jobs report, the markets now expect the central bank to bump up its key rate on June 1. That rate has been at a rock-bottom 0.25 per cent for more than a year.