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Fixed Mortgage Rates on the Rise: What You Need to Know

Amidst growing speculation, fixed mortgage rates have been on the rise in recent weeks, causing concern among potential homebuyers and homeowners alike. The pivotal factor influencing these rates is the Government of Canada 5-year bond yield, which has breached a significant threshold of 4%. As this level has acted as a crucial resistance point for several months, experts suggest that if the 5-year bond yield consistently remains above 4% for at least a few sessions, it could pave the way for even higher mortgage rates. In this article, we’ll explore the recent developments in fixed mortgage rates and their potential impact on the housing market.

Fixed Mortgage Rates

The Government of Canada 5-Year Bond Yield:

The Government of Canada 5-year bond yield is a crucial indicator that influences fixed mortgage rates. Currently surpassing the 4% mark, this development has caught the attention of financial experts. Ryan Sims, a broker at TMG The Mortgage Group and a former investment banker, highlighted in his blog that rates as high as 4.40% might be on the horizon if the 5-year bond yield continues to stay above 4% consistently. However, there is also hope for homebuyers as Sims predicts a likely downward trend in mortgage rates if the yields fail to sustain above 4%.

Impact on Fixed Mortgage Rates:

Major banks, including CIBC, RBC, Scotiabank, and TD, along with several other mortgage providers, have already responded to the rise in the 5-year bond yield by increasing their fixed mortgage rates. Data compiled by shows that the lowest nationally available deep-discount insured 5-year fixed mortgage rate has increased by 15 basis points in just the past week. This upward trend is causing anxiety among potential homebuyers, leading them to postpone their plans until interest rates become more favorable.

Homebuyers’ Perspective:

A recent survey conducted by Ipsos reflects the growing concerns among Canadians regarding rising mortgage rates. The survey found that nearly two-thirds of Canadians are now waiting for rates to drop before considering purchasing a home. Young people between 18 and 44 years old are particularly impacted, with 68% of them finding it more challenging to buy a home compared to the past. The uncertainty surrounding interest rates has forced many potential buyers to hold off on their homeownership dreams until more favorable rates are available.

Financial Anxiety and the Broader Economy:

Housing costs continue to be a primary cause of financial anxiety for 71% of Canadians. Fluctuations in mortgage rates can have a significant impact on the broader economy, affecting consumer spending, construction activity, and the overall real estate market. As mortgage rates rise, homeowners may face increased financial stress, potentially leading to reduced discretionary spending and slower economic growth.

As fixed mortgage rates continue to rise, driven by the surge in the Government of Canada 5-year bond yield, potential homebuyers find themselves in a challenging position. The impact of these rate fluctuations is evident in the housing market, with many Canadians postponing their plans to buy a home until rates become more favorable. While financial experts predict the possibility of even higher rates, there is also hope for a downward trend if the 5-year bond yield fails to sustain above 4%. For now, staying informed about market developments and consulting with mortgage experts will be crucial for anyone navigating the current real estate landscape.

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