The Bank of Canada left its overnight rate unchanged at 0.25 percent, allowing long-term mortgage rates to stay low. This resulted in fixed-rate mortgages with five-year terms leading the way.
There was an increase in demand for variable-rate mortgages, mainly due to their lower interest rates and flexibility. Financial institutions began offering new products, such as split-rate mortgages, which offer a mix of fixed and variable rates. These types of mortgages allow borrowers to take advantage of the low long-term fixed rates while minimizing their exposure to future rate increases.
The Bank of Canada announced in August 2010 that they would no longer accept privately held collateral as security for loans from financial institutions. This announcement caused some concern among the banks, as they were relying on this method to secure financing during times when other sources of capital were unavailable. Another consequence was an increase in the cost of securitization.
Overall, the mortgage market in August 2010 was more stable than in months prior. The low overnight rate enabled fixed-term mortgages to remain competitive and attracted both first-time buyers and homeowners looking to refinance. Mortgage providers continued to introduce new products to meet the needs of their customers, such as split-rate mortgages and customer loyalty incentives.
Summary
The mortgage market in August 2010 experienced some volatility due to the Bank of Canada’s decision not to change their overnight rate, keeping long-term mortgage rates low. As a result, five-year fixed-rates were dominant, and there was an increase in demand for variable-rate mortgages due to their lower interest rates and flexibility. To accommodate this, new products like split-rate mortgages, which combine both fixed and variable rates, were introduced. The Bank of Canada's decision to no longer accept privately held collateral as security for loans from financial institutions caused some concern among the banks and an increase in the cost of securitization. Despite this, the mortgage market in August 2010 managed to remain stable due to the low overnight rate, leading to an increase in first-time buyers and homeowners looking to refinance. Mortgage providers provided new products such as split-rate mortgages and customer loyalty incentives in order to meet the needs of their customers.
This article was contributed on Nov 03, 2023
