A surge in bond yields on Thursday is threatening to deliver notably higher fixed mortgage rates in the coming days.
The Canada five-year bond yield jumped to 3.64 per cent as of Thursday afternoon, reflecting market fears about inflation and stubbornly high oil prices. It’s the highest the yield has been since May, 2024, and an increase of 16 basis points in just one day. (There are 100 basis points in a percentage point.) It shows that markets are more concerned about inflation arising from the war with Iran than the trade war’s impact on the Canadian economy.
Joe Jacobs, a Calgary-based mortgage broker, said fixed mortgage rates are currently sitting at the low 4-per-cent range, but they could increase quickly to the mid- or high-4-per-cent level in the coming days.
“There are historical things that are happening, and history tends to repeat itself. When energy prices and oil are up, bonds [yields] are up, and rates are up,” Mr. Jacobs said.
He said mortgage rates have also been unusually competitive in recent months. The five-year fixed rate tends to be 1.2 to 1.6 percentage points higher than bond yields, but some of the lowest rates available according to Ratehub.ca are little more than 0.5 per cent higher than the current yield.
With the high likelihood of fixed rates climbing in the next week, Mr. Jacobs said it’s imperative for homebuyers to get a mortgage preapproval with a rate guarantee, and for anyone up for renewal to get a rate hold as early as possible.
Meanwhile, markets firmly expect that the Bank of Canada will increase its headline interest rate, resulting in higher variable rate mortgages too. Bond swaps markets, which give a sense of market expectations on monetary policy, have priced in a 25-basis-point rate hike by the end of the year, and a second rate hike in early 2027.
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Mortgage rates are sourced by Ratehub.ca. For a comprehensive list of today’s mortgage rates for each term/type, visit ratehub.ca/best-mortgage-rates.
Ratehub.ca is a mortgage-rate comparison marketplace and mortgage brokerage. It helps millions of Canadians compare and obtain the best mortgage rates, credit cards, insurance, deposits and loan products.
Rates shown are the lowest available for each term/type and category (insured versus uninsured) as of market close on Sept. 10.
