once the effects of reduced expectations for house price inflation and the new mortgage guidelines have been absorbed. bank staff have also been monitoring the impact of the new mortgage guidelines and higher interest rates on cash flow as households renew their loans. from our initial look at individual loan - level data in 2019, we see that mortgage payments did not rise for most borrowers who recently renewed a five - year, fixed - rate mortgage. despite increases in our policy interest rate, bond yields and mortgage rates have declined this year along with global interest rates. the bank will present its complete analysis of housing and other issues in our next financial system review, which will be out in a couple of weeks. we will also post information on our financial system hub — a section of our website featuring the latest analysis of key financial issues. toward a more flexible mortgage market given how different the various regional housing markets can be, it is worth looking to see whether canada ’ s mortgage market could become more flexible, giving people more choices and increasing the economy ’ s ability to adjust. canadian homeowners and financial institutions have been well - served by our mortgage market. but it is still important to think about ways to innovate and make a good system better so that borrowers and lenders can make choices that better suit their circumstances. of course, there have been innovations in canada ’ s mortgage market over the years. mortgage brokers have appeared on the scene. financial institutions are doing more business online and reducing the time between application and approval. and mortgages combined with home equity lines of credit, or helocs, have become popular. these give canadians ready access to the equity they have built in their homes, helping people make major purchases and smooth their consumption over time. still, there has been significantly less innovation in terms of the actual mortgage product itself. we could look at ways to develop a more flexible mortgage market that gives more choice to customers, lenders and investors, while making the market safer and more efficient. diversify mortgage durations one basic idea would be to encourage more diversity in mortgage durations. it is true that most financial institutions offer fixed - rate mortgages longer than five years. but 45 per cent of all mortgage loans have a fixed interest rate and a five - year term. in comparison, just 2 per cent of all mortgages issued last year were fixed - rate loans with a term longer than five years. there are historical reasons why the five - year fixed - rate mortgage has been so dominant

2 per cent in the period prior to the crisis. the neutral rate serves as an anchor for our models and analysis, but it is not a fixed beacon because the structural factors that influence it can change over time. relative to this longer - term concept of neutral, the policy rate in canada is stimulative. 9 we need this stimulus to close the output gap and maintain inflation sustainably at target. but even with a closed output gap and inflation at target, the policy rate may not be at neutral. as long as the factors leaning on growth persist, a policy rate below neutral would be required to maintain inflation sustainably at target. in the absence of this policy stimulus, the output gap would reemerge and inflation would fall below target. 10 some of the headwinds appear to be dissipating, but there is considerable uncertainty about how long they will persist. let ’ s not forget that advanced economies ’ debt doubled from roughly 160 per cent of gdp to 320 per cent between 1980 and 2010, and will take a long time to unwind. in fact, the global savings rate is expected to increase over the next five years. a joint analysis by the financial stability board and the basel committee on banking supervision attempts to quantify this adjustment. it suggests that a 3 - percentage - point increase in banks ’ common equity tier 1 capital ratio would raise lending spreads by around 45 to 50 basis points. estimates for canada, prepared by the bank of canada, fall very close to this range. o. blanchard, d. furceri and a. pescatori, “ a prolonged period of low real interest rates? ” chapter 8, secular stagnation : facts, causes and cures, a voxeu. org book edited by c. teulings and r. baldwin ( london, uk : cepr press, 2014 ). also see : j. cruz lopez, r. mendes and h. vikstedt, “ the market for collateral : the potential impact of financial regulation, ” bank of canada financial system review ( june 2013 ) : 45 – 52. common global developments play a central role in determining longer - run neutral rates in all countries, but country - specific differences in structural factors do introduce some heterogeneity. shorter - run concepts of neutral can differ even more because they are influenced by cyclical factors that can vary substantially across countries ( for a discussion of alternative definitions of neutral rates, see box 1 in mendes, 2014 )