It’s not the best of news for homeowners whose mortgages are coming due this spring, as fixed rates have risen this week.Canada’s five-year government bond yield started rising on Tuesday and had risen by close to 20 basis points by 8 am EST Friday morning. The increase in bond yields came on news of swelling US debt spilling into global bond markets, reports Canadian Mortgage Professional (CMP). The five-year yield is a key benchmark for fixed rates. When the yield rises, so do fixed mortgage rates, as lenders increase their lowest fixed rates almost immediately, with more hikes ahead if economic uncertainty continues to increase. Market watchers say there is now doubt about whether a move by the Bank of Canada could keep variable rates steady. The bank’s next rate announcement is June 4, followed by another on July 30. In April, overall inflation increased by just 1.7%, but that was influenced by the cancellation of the consumer carbon tax. Real inflation, excluding energy costs, rose to 2.9%, potentially ringing alarm bells for Bank of Canada Governor Tim Macklem, as he, and governing council, consider whether to cut interest rates in the months ahead..“In the US, 10- and 30-year bond yields shot upwards after the House of Representatives passed President Trump’s so-called ‘Big Beautiful Bill’, a measure the non-partisan Congressional Budget Office said could add around $2.3 trillion to the already huge national budget deficit over the next decade,” reports CMP, adding it “sparked global jitters about the debt outlook for the world’s largest economy, which also saw Moody’s downgrade the US credit rating last week.” Canada is also facing economic uncertainties in the coming months, with the continuation of the trade war with the US that, in addition to slowing economic growth, threatens jobs across the country and risks pushing inflation higher. “Canada is on track to enter a recession with a further 100,000 jobs possibly on the chopping block, according to TD Chief Economist, Beata Caranci, another factor lowering investor confidence in the national economic outlook,” reports CMP. If the bank’s decisions in June and July are to keep cuts on pause, there will be no movement of variable rates, with the unsteady bond market leaving little clarity over the likely direction of fixed rates. .According to Victor Tran, a mortgage and real estate broker with RATESDOTCA, a jump in the five-year government yield past 3% could push lenders to hike fixed rates again, although he said they’ll probably wait until the Bank of Canada’s June 4 announcement before deciding. Adding to uncertainties, once red-hot housing markets, especially in Ontario and BC have gone cold, and a chill has also descended on Calgary, which was the nation’s most active market over the last year. Sales in Cowtown, as of May 22, were down almost 20% from this time last year.
