Just when we thought we were catching a break, fixed mortgage rates are now facing upward pressure once again. Since early May this year, they’ve been steadily climbing, tacking on an increase of more than 1%. But there was a brief sigh of relief in late August when some lenders decided to trim their fixed mortgage rates for the first time in months. It appeared that fixed rates might start to fall across the board. But thanks to yesterday’s disappointing CPI inflation report, the rate lowering party seems to have come to an end.

The bond market reacted with yields spiking up by more than 4% yesterday and are up again today.

As a result, there is now upward pressure on fixed mortgage rates once again. 

While we haven’t seen any lenders officially announce any increases to their fixed mortgage rates, it’s just a matter of time before they do. Lenders are independently in control of exactly when, and by how much they’ll increase their fixed rates. It’s not a synchronized dance as it is when the Bank of Canada changes their rate. Instead, it’s more like a freestyle jam session. One lender might amp up their rate by 0.15%, while another opts for a more modest 0.10% nudge for example. These adjustments could take place on the same day, be spaced out by several days, or even over a week in some cases.

Since some lenders didn’t reduce their rates after the recent drop in bond yields, we’re not at the point where they feel compelled to implement hikes. However, if bond yields continue their upward trajectory…and current indicators suggest they will… fixed mortgage rates can then be expected to increase across the board.

 

Inflation’s Wild Ride

It was understood that we would experience some inflation turbulence through the remainder of 2023. But as long as it stayed within the bounds of economists’ expectations, it shouldn’t have had much of an impact on rates.

But that’s not how it played out. 

Economists were expecting inflation to increase to 3.8% yesterday. Instead, it decided to be dramatic, rising to 4.00% on the nose.

 

Does This Mean Another Increase from the Bank of Canada is Expected?

Yesterday’s less than promising inflation report was not what anyone wanted to see. Particularly, the Bank of Canada. While the inflation spike has their guard up, it doesn’t mean that they’ll be hiking with their next scheduled rate announcement on October 25th. However, the next CPI inflation report is scheduled for release just eight days earlier on October 17th. If inflation overshoots expectations yet again, then I would brace yourself for another BoC rate hike on October 25th.

 

Conclusion

In the ever-changing landscape of mortgage rates and inflation, one thing remains certain: the financial world is unpredictable. As we continue this journey, it’s essential to stay informed on what’s happening in the mortgage rate market. Information and forecasts are always changing. What is expected to happen today might be completely different from what’s expected to happen tomorrow. While we can’t predict the future with certainty, we can make informed decisions to safeguard our financial well-being.

Everyone’s situation can be a bit different and there is no one size fits all mortgage advice. The right course for one person may not be right for the next. At the Paul Meredith Team, we are committed to delivering tailored guidance that aligns with your specific circumstances.

If you have a new home purchase closing within the next 120 days, or a mortgage coming up for renewal within the next 120 days, then I would recommend reaching out to us to get the lowest rate locked ASAP. Your financial well-being remains our top priority, and we stand ready to assist you in charting the most favourable course for your unique journey.