Mortgage rates are dependent upon the real rate of interest, inflation expectations, and an additional spread that includes the spread between risk-free and mortgage securities as well as servicer markups. I have graphed the three components (real rate, inflation, and additional spread) of the 5-year average mortgage rate below:
The inflation expectation is calculated by taking the difference between the long Government of Canada real return bond and the Government of Canada long bond. The real 5 year rate is calculated according to the Fisher equation, however I used the long breakeven rate (BER) and not the 5-year BER when calculating inflation expectations.
The "spread" has been increasing since the beginning of 2011. Recent reduced mortgage rates seem to be attributable to lower real rates and lowered inflation expectations. By these calculations, the real spread from risk-free has been higher than before the 2008 recession.