Bond Yields Surge, Predicted Impact on Mortgage Rates
Bond yields, including the Government of Canada 5-year bond, have risen significantly, leading to an anticipated 20 basis point increase in mortgage rates. Ron Butler of Butler Mortgage expressed concern over these developments, expecting rates to rise further. Two-year fixed rates are now around 7%, and 3-year terms are approaching 7%. Rising interest rates are driven by expectations of higher rates and Canada’s economic resilience.
Concerns About Bond Prices and Mortgage Impact
Falling bond prices, which lead to higher yields, are a result of rising interest rates on newly issued bonds. This poses challenges for bond owners, including major banks. Higher yields may push 5-year fixed mortgage rates towards 8%, though it’s not the base case. Mortgage holders are already facing higher rates, impacting affordability and renewals, with monthly payments rising significantly.
Increasing Mortgage Payment Burden
Over a third of mortgage holders have felt the impact of higher rates, with all mortgage holders expected to experience increased payments by 2026. The average monthly mortgage payment for an average-priced home has surged to nearly $3,600, up 21% YoY and over 80% in two years.
The bond yield surge is reshaping the financial landscape, impacting mortgage rates and homeowners’ budgets. It’s crucial to stay informed and make prudent financial decisions in these uncertain times.
Published By Steve Huebl