Why are rates not coming back down?
Good Morning!
As we’ve seen the spreads on the bond yields increase, the question of “when are rates coming down?” has been asked a lot!
Earlier in the year when volumes were low, volumes for the banks were also low. During Spring Market the race for obtaining 2009 market share was on! Profitability was taking a back seat to market share and we saw very competitive rates from the banks. They were treating a mortgage as a loss leader to get that client in the door. Some also had extra deposit money from RRSP season to lend out.
Now into the third quarter of 2009, profitability is again top of mind. Remember year end for the banks is Oct 31. They only have 4 months left to hit their revenue targets.
Therefore, we are now seeing banks hanging onto this higher spread for as long as they can….there may be some movement soon, but banks are ensuring bond prices stay consistent before they make a move.
If rates change-you will be the first to know!
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