Recapping the latest mortgage news over the past few weeks

The current upswing in bond yields provided a reminder of why they are so difficult to forecast. This post explains why they are rising and outlines the implications for our fixed mortgage rates.

Why Are Bond Yields Rising?

Bond yields have been rising in recent weeks due to a number of factors, including:

• Stronger-than-expected economic data: Recent economic data, such as the September Consumer Price Index, has shown that the economy is stronger than expected. This has led investors to believe that the Bank of Canada (BOC) may need to raise interest rates sooner than previously expected.

• Concerns about inflation: While inflation has come down from its peak, it remains elevated. This has led to concerns that the BOC may need to keep interest rates higher for longer in order to bring inflation back down to its target of 2%.

• Global economic uncertainty: The war in Ukraine, the ongoing energy crisis, and the potential for a global recession have all contributed to uncertainty in the global economy. This uncertainty has led investors to seek safe-haven assets, such as bonds, which has pushed bond yields lower.

What Does This Mean for Fixed Mortgage Rates?

As bond yields rise, fixed mortgage rates tend to follow. This is because mortgage lenders base their fixed mortgage rates on the yields of government bonds. When bond yields rise, lenders have to charge higher rates to compensate for the increased risk.

The recent rise in bond yields has led to an increase in fixed mortgage rates. This is a trend that is likely to continue in the short term.

What Should You Do?

If you are considering buying a home or renewing your mortgage, you should be aware of the recent rise in fixed mortgage rates. It is important to speak with a mortgage broker to discuss your options and to get the best possible rate.

Variable Mortgage Rates

While fixed mortgage rates are likely to continue rising in the short term, variable mortgage rates are still likely to head lower. However, a stronger-than-expected employment report and concerns about spiking oil prices may cause the BoC to slow the pace of its cuts.

Recent Changes to Mortgage Rules

This post details Canadian inflation’s return to 2%, the US Federal Reserve’s 0.50% rate cut, and our federal government’s announcement of several new mortgage-rule changes.

Mortgage Stress Test Rules

This post details a recent change that was (finally) made to our mortgage stress-test rules and explains how it will help renewing mortgage borrowers access better rates.

The Bottom Line

Government of Canada bond yields dropped a little last week, but fixed mortgage rates still moved higher in response to the previous bond-yield run up. This morning’s release of our latest Consumer Price Index, for September, will determine where they go from here.

What’s Next For Mortgage Rates?

It is impossible to predict with certainty what will happen to mortgage rates in the future. However, the recent rise in bond yields suggests that fixed mortgage rates are likely to continue to rise in the short term. It is important to stay up-to-date on the latest mortgage news and to speak with a mortgage broker to discuss your options.

I’ll check back next Monday with my prediction of what the Bank of Canada (BOC) has in store for us at its meeting on October 23, 2024.