Episode 41 Transcript – Bond yield point spread

This is Jessi Johnson live outside of Sutton Group West Coast Realty, my Langley office. I received an article from a friend on Facebook this afternoon, his name is Julian and he made a very good point about the point spread right now in the bond yield and figured it would be a good idea to do a video blog on it and I thought it would be an outstanding idea as well. Right now the five year bond is coming in at 3.04%. That’s historically a very low rate. If you look back at the numbers in the past, the five year fix is dictated by the bond yield and that should yield you a five year fixed rate of 4.14%. It’s not. The average is 5.79%. Some lenders are offering posted rates at 7.5%. That’s over a 4.25% gap. That’s astronomical. That’s a very, very large gap. Anyways, very interesting point and wanted to point that out that right now the banks are holding a lot of their own money. Another perfect example is with the variable rate mortgage which is considerably higher than it should be right now. We should be getting prime minus .6%, which is a good industry average over the past ten years. We are getting prime plus one. Again, the banks are scared. They don’t want to lend money. You can reach me at www.firsthomeinfo.ca. Have a good day!