Last week’s major spike in bond yields has now translated into higher mortgage rates, and economists expect that will add more downward pressure on housing prices.
The lowest advertised five-year fixed mortgages on Ratehub.ca jumped by 15 basis points since last week, as market fears around inflation, U.S. fiscal policy and oil prices caused the Canada five-year bond yield to jump to 3.7 per cent earlier this week. It was the highest level since 2024 for the bond, which greatly affects how mortgage lenders set their rates.
“The affordability calculus and the investment calculus just doesn’t make sense at these interest rates and house prices,” said Robert Kavcic, senior economist with BMO Capital Markets.
“If we get sustained pressure on long-term bond yields it’ll keep a pretty hard lid on the market.”
Real estate boards in cities such as Vancouver and Toronto were hopeful that 2026 would end with modestly higher sales volumes and property valuations. However, Greater Vancouver Realtors has since lowered its expectations for the year and is now projecting slight decreases in both sales volume and valuation.
The Canada five-year bond yield had fallen to 3.54 per cent as of Thursday afternoon, but Mr. Kavcic attributed the decrease to regular market fluctuations and said he still expects yields will remain elevated in the current environment.
He said the major variable that could bring down bond yields significantly is whether there will be an end to the Iran war.
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Mortgage rates are sourced by Ratehub.ca. For a comprehensive list of today’s mortgage rates for each term/type, visit ratehub.ca/best-mortgage-rates.
Ratehub.ca is a mortgage-rate comparison marketplace and mortgage brokerage. It helps millions of Canadians compare and obtain the best mortgage rates, credit cards, insurance, deposits and loan products.
Rates shown are the lowest available for each term/type and category (insured versus uninsured) as of market close on Thursday.