Interest rates are unexpectedly dropping on five-year mortgages — and the global banking crisis is partly the cause. Canadian homebuyers are about to get an unexpected break on their mortgages — in part, because of the global banking crisis.

Following the collapse of Silicon Valley Bank and Signature Bank, government bond yields have tanked, and as a result, mortgage lenders are slashing rates on five-year fixed mortgages, which are pegged to five-year bonds, by as much as 0.4 of a percentage point. And there may be more rate declines to come.

“It doesn’t hurt to lock in a preapproval rate right now,” said Robert Kavcic, chief economist at BMO Capital Markets, “especially if you’re finally looking for some relief on interest rates.”

Several mortgage lenders and brokerages have started slashing fixed rate mortgages by as much as 40 basis points, according to Victor Tran, a mortgage and real estate expert at Ratesdotca.

“And we are expecting more lenders to adjust rates this week,” Tran added. “If you are looking for a home, now is the time to get a pre-approval.”

Currently, fixed rates for five-year insured mortgages are at 4.49 per cent, according to numbers from Ratesdotca. Meanwhile for three-year insured they’re at 4.59 per cent for five-year uninsured they’re at 4.79 per cent and for three-year uninsured they’re at 4.89 per cent.

This can provide some long-awaited relief for buyers shopping for these kinds of mortgages, says said Ron Butler, mortgage broker of Butler Mortgages.

“For most of last year, a five-year fixed rate was somewhere between 5.09 per cent and 6.09 per cent,” Butler said. “Today we can find you a five-year fixed rate for just under 5 per cent.”

The fall in bond yields and subsequent lower fixed rates “is a reflection of the fact that most people and most of the economists and analysts in North America believe that the Bank of Canada has stopped raising interest rates,” Butler said. “And it would appear that soon the U.S. Federal Reserve will stop raising rates.”

While it’s unlikely fixed rates will drop as low as 2 per cent or even 3 per cent, Butler said they might be a better choice than variable rates moving forward.

“It is the greatest likelihood that for the next year or more that fixed rates will be a better value for Canadians than variable rates, which was not true for most of the last 35 years.”