The current returns on Canada’s five-year government bonds suggest that interest rates might be embarking on a new upward trend. The five-year government bond yield in Canada is reaching its highest point of the year. If the economic data in the next month doesn’t show signs of cooling down, there’s a rising possibility that new highs might be reached.
However, if you favor low interest rates, there’s no need to lose hope just now. Even with the recent rise in bond yields and substantial government stimulus, the heavily leveraged Canadian economy remains susceptible to policy rates reaching multi-decade highs.
This is the reason why traders in forward rate market where they speculate the interest rate still expect cuts in interest rate from Bank of Canada. This is expected to begin in the summer, as per data from CanDeal DNA. This projection remains intact despite the growing probability of delays in U.S. rate cuts.
Lowest nationally available mortgage rates (Insured):
| TERM | PROVIDER | INSURED |
| 1-year fixed | Citadel Mortgages | 6.29 |
| 10-year fixed | Nesto | 5.84 |
| 2-year fixed | Citadel Mortgages | 5.49 |
| 3-year-fixed | Ratehub | 4.84 |
| 4-year fixed | Citadel Mortgages | 4.94 |
| 5-year fixed | Citadel Mortgages | 4.69 |
| 5-year hybrid | Scotiabank (eHome) | 5.69 |
| Variable | Nesto | 5.90 |
In the mortgage realm, this week was quieter, except for a five-basis-point increase in four-year fixed rates. However, this calmness might not last long. The rising bond yields are expected to raise some of the best fixed rates, especially for default-insured mortgages, which closely follow bond market fluctuations. Therefore, if you’re in the market for a fixed-rate mortgage, it’s advisable to secure that rate as fast as you could.
Regarding variable rates, bond markets are hoping for less inflation, weaker employment and GDP reports on May 10, 21, and 31, respectively. This could provide the Bank of Canada with sufficient assurance to consider cuts in June or July.
However, this scenario is heavily dependent on various factors, and the trajectory of Canada’s rates might be influenced by developments in the U.S. in the meantime. Hence, anticipate possible deviations in rates before witnessing any improvements in borrowing costs.
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