Let's start with some good news.

After weeks of nail-biting amid surging rates, Canadian bond yields have graciously returned to their August starting point, shedding 26 basis points from last week's 16-year high.

That's some welcome relief, however temporary it may be.

The difference between insured and uninsured mortgage rates is wider than a canyon nowadays.

That’s creating unusual scenarios where it’s actually cheaper for a #low-ratio# borrower to buy #transactional insurance# and get a default-insured mortgage than to pay a higher uninsured rate.

Sometimes, it even makes sense for borrowers to pay for insurance themselves rather than get an insurable rate (where the lender buys the insurance).

It all depends on the circumstances, including:

The Bank of Canada isn't in the habit of hiking, pausing, hiking, pausing and hiking some more.

If the past is any guide, it prefers to make necessary adjustments to monetary policy in tight bunches.

In MLN's interview with Housing Minister Sean Fraser last week, he noted how the government should offer more builders lower financing costs to spur development.

One way that Ottawa is already doing that—and a program the Liberals might increase funding for—is the Rental Construction Financing Initiative (RCFI).

If you're interested in building a 5+ unit rental building, read on because this program offers developers exceptional benefits—including but not limited to fantastic interest rates, flexible construction draws, easy payment terms and more forgiving underwriting than a typical lender.

This is a government program one can get behind—for three good reasons:

1. It barely costs taxpayers a thing (it's not a subsidy in the traditional sense)
2. It aims to help mostly middle-class renters (who all too often get lost in affordable housing discussions focused on low-income brackets)
3. Imperfections aside, it's pretty developer-friendly.

One might even say the government's RCFI program is making rental construction financing great again. Here are the highlights...

What is the RCFI?

“A record 95% of new mortgages in June 2023 were fixed-rate,” reported National Bank Financial’s Daren King on Tuesday.

This all-time low for variable market share sharply contrasts with the months preceding prime rate's uphill journey. Back then—just 18-24 months ago—up to 57% of mortgagors took their chances with a variable.

Contrary to NBF’s report, however, the fact that borrowers are giving the cold shoulder to variables isn’t overly surprising.

There are at least six reasons why today's mortgage shoppers don’t want to float:

Some lenders have an unconventional idea of partnership. They boldly label brokers as their "partners" but treat them with the same respect one might reserve for a telemarketer who calls during dinner.

If you're a lender, one strange way to show broker partners you 'care' is to withhold your best rates from them, giving the lowest pricing only to your retail reps. It's almost like telling brokers, "You're expendable. Deal with it."

Eighteen months into one of the most vigorous hiking cycles in history, 90-day #prime mortgage# arrears are still dragging along the historical bottom at just 15 bps. A year ago, virtually every analyst in the game thought they'd be higher by now.

But the fact that 90-day arrears are less than half the 36 bps long-term average is no longer a mystery. Low unemployment, strong equity positions, government intervention, supportive banks, accumulated savings, strong underwriting and other factors are keeping Canadians in their homes and jingle-mail at bay.

The world's most influential bond, America's 10-year Treasury, is making a brisk run for its 4.34% October high (chart above). That's raising the stakes for beleaguered borrowers on both sides of the border.

This latest yield sprint comes on the heels of: