Mortgage rates stay lofty as the economy keeps defying central banks
The mortgage market always has its eyes on the five-year government bond yield, which guides fixed rates. That yield zoomed to a new high since the global financial crisis on Thursday.
The catalyst was U.S. rates. They rocketed higher as inflation-unfriendly data raised the prospect of another Federal Reserve interest rate hike in September.
We haven’t seen fixed and variable mortgage rates this high in more than two decades. That’s widening cracks in the Canadian economy as more and more borrowers run out of credit and savings. Insolvency risk and depleted discretionary income are precisely why the Bank of Canada can’t afford much more interest rate tightening.
In the mortgage rate department, leading insured and uninsured five-year fixed rates rose 10 bps this week. The lowest nationally-available insured variable climbed five bps. Apart from that, it was a quiet week among the rate leaders.
Next week may not be so quiet, given the new highs in government bond yields. The Canadian bond market is making its demands clear. Investors want the Bank of Canada and Fed to provide a clear bias toward pausing before they’ll give us meaningful rate improvement.
Rates were sourced from the MortgageLogic.news Canadian Mortgage Rate Survey on July 27, 2023. Only providers advertising rates online and lending in at least nine provinces are included. Insured rates apply to those buying with less than a 20 per cent down payment or switching a pre-existing insured mortgage to a new lender. Uninsured rates apply to refinances and purchases over $1-million and may include applicable lender rate premiums. For providers whose rates vary by province, their highest rate is shown.
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