Article Summary
In the past two months, mortgage rates have fallen sharply due to a plunge in bond yields driven by U.S. tariff concerns. However, these rates have risen again recently as the U.S. 10-year Treasury yield increased from around 4% to over 4.5%. Canada’s 5-year fixed-mortgage rates are closely tied to the country’s 5-year bond yield, which in turn is influenced by the U.S. 10-year Treasury. This means that domestic mortgage rates are often shaped more by global forces than by local economic conditions.
What This Means for You
- If you’re in the market for a fixed-rate mortgage, you may want to consider locking in a rate soon, as bond yields and mortgage rates have been rising.
- Monitor economic indicators and developments in the U.S. economy, as they can have a significant impact on Canadian mortgage rates.
- Consider your risk tolerance when choosing between a fixed or variable mortgage rate. While variable rates may decrease if the U.S. Federal Reserve cuts interest rates, there is also a risk that rates could increase.
- Keep an eye on the Bank of Canada’s interest rate policy decisions, as they could impact variable mortgage rates.
Original Post
Just two months ago, rates had fallen sharply following a plunge in bond yields driven by U.S. tariff concerns.
Canada’s 5-year fixed-mortgage rates are closely tied to the country’s 5-year bond yield, which in turn is influenced by the U.S. 10-year Treasury. That means domestic mortgage rates are often shaped more by global forces than by local economic conditions.
“What influences the 5-year government of Canada bond is not necessarily what’s happening in Canada; it is, in many cases, the yield on the 10-year U.S. Treasury,” Bruno Valko, VP of National Sales at RMG, told Canadian Mortgage Trends.
In early April, the U.S. 10-year Treasury dropped below 4%, but now it’s back above 4.5%. During that time, Canada’s 5-year bond yield also increased from a low of around 2.50% to 2.85% as of today — and fixed mortgage rates have moved in step.
The rise in bond yields has already led some of the big banks to adjust their rates. CIBC and RBC have each raised their five-year fixed rates by about 10 basis points, including on high-ratio options.
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