Fixed mortgage rates have lately risen, and there is concern that they will continue to rise. The 5-year bond yield of the Government of Canada, a significant predictor of 5-year fixed mortgage rates, has crossed the crucial 4% mark, supporting this speculation.
This level has served as a stumbling block in recent months, and experts anticipate that if the bond yield remains above 4%, mortgage rates will rise further. According to one economist, Ryan Sims, passing 4% might result in rates reaching 4.40%. If yields do not continue over 4%, rates may decline.
In the last week, major banks such as CIBC, RBC, Scotiabank, and TD, as well as other mortgage providers, have hiked their fixed mortgage rates. In the last week, the lowest nationally accessible 5-year fixed mortgage rate with considerable discounts has risen by 15 basis points.
According to an Ipsos poll, the majority of young Canadians aged 18 to 44 say that buying a home is more difficult now than it was for their parents’ generation. As a result, many would-be homebuyers are waiting for borrowing rates to fall before making a decision. Approximately 68% of Canadians planning to buy a home or refinance their mortgages are deferring their plans until interest rates improve.
Former Bank of Canada Governor David Dodge has warned that high interest rates would most likely remain in place for some time in order to fulfill the central bank’s 2% inflation target.
Despite a minor slowdown in the Canadian economy, Dodge forecasts that interest rates will need to remain high for the next two years, maybe until 2025, in order to achieve the targeted inflation target. He predicts 1% economic growth but believes the economy will avoid a recession.
