2/14/2025
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Posted in Canadian Economy and Interest Rates by Vanguard Realty | Back to Main Blog Page
Despite having risen since the start of the month, bond yields are still down by more than 50 basis points (0.50%) from their January highs.
Since bond yields influence fixed mortgage rate pricing, BMO, CIBC, RBC, TD and National Bank responded with rate cuts across all mortgage terms ranging between 0.10% and 0.25%.
The big banks aren’t the only mortgage providers responding to lower yields; countless others having been dropping rates over the past two weeks.
Rate expert Dave Larock highlighted that bond yields have been pushed lower by the growing concerns over a potential trade war with the U.S. However, he cautioned that these same economic pressures could lead to rising rates if inflation resurfaces.
“Bond-market investors have initially reacted to the trade war threat by pushing down bond yields, but tariffs are fundamentally inflationary,” he wrote in his latest blog.
“In the medium term, if higher prices persist, and if opportunistic companies enact non-tariff related price increases, price pressures will broaden,” he added. “In that scenario, both bond yields and the fixed mortgage rates that are priced on them will rise.”
Ron Butler of Butler Mortgage agrees, telling Canadian Mortgage Trends that the latest forecasts out of the U.S.–for only one quarter-point cut at the end of the year, or potentially no more at all–are likely to drive conventional rates higher again by another 20 bps.
However, he expects mortgage competition to remain fierce heading into the upcoming spring market.
“I fully expect banks to be very competitive in the spring real estate market. RBC & CIBC are non-broker channel lenders who seem determined to gain share & hold onto all their renewals,” he said.
“Banks are prepared to compete on every mortgage term, including high-ratio, and I do not believe that will change,” he added.
As we recently wrote, 5-year variable rates are now nearly on par with fixed equivalents following six consecutive rate cuts from the Bank of Canada. This means borrowers are increasingly faced with the decision of weighing potential savings against the heightened market volatility.
Source: Canadian Mortgage Trends
Canadian Banks, Fixed Rate Mortgages
