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How the Mortgage Market Works
In Canada, mortgage rates are set by the major financial institutions, in a "follow-the-leader" manner, with one of them, usually a major bank, taking the "leader" role. All major financial institutions earn a large part of their income on the "spread", which is the difference between loan/ mortgage rates they charge to borrowers and the rates they pay to depositors/ investors for an equivalent term.
In this section, the basic "cause and effect" factors behind these mortgage rate movements are discussed in greater depth.
How the Bond Market Affects Mortgage Rates
The bond market, which is a part of the worldwide "wholesale money market" is the great leveler. It is affected by monetary and fiscal policies and economic and political changes in all the major nations of the world.
How Market Changes can Affect Mortgage Decisions
Financial markets can vary greatly, and individual mortgage borrowers' most effective strategies can vary along with these conditions.
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