Fixed mortgage rates continue to rise, and the incessant upward pressure they are under is not letting up. The lowest fixed mortgage rates that are available today may no longer be available tomorrow. Anyone shopping for the lowest mortgage rates must be conscious of this and should be locking in a rate sooner than later.

It’s a frustrating time for everyone these days… mortgage professionals included. To make matters worse… statistics Canada announced yesterday that inflation has increased more than expected, which fuels the fire even further.

The question is, just how much longer is this madness expected to continue?

There are many who believe that fixed rates won’t move until the Bank of Canada changes their rate. Nothing could be further from the truth.

While the BoC has eight set rate announcements per year, fixed rates have their own agenda with no set schedule. Fixed rates can move at any time and are largely influenced by bond yields, among other factors.

Bond yields have been rising precipitously and continue to climb higher each day. They are up another 1.52% today at the time of writing this blog and have risen by a whopping 46% since early May. At that time, the lowest 5 year fixed rate for an insured mortgage was 4.24%. The lowest rate for the same mortgage today is almost a full percentage point higher at 5.19%*. This will likely be increasing soon.

Fixed rates have been increasing on a weekly basis and the upward pressure has not shown any signs of easing. Eventually, rates will level off and start to drop, but there is nothing to indicate when this will happen. As inflation is expected to remain sticky for the rest of the year, I would not expect any notable downward movement prior to 2024.

 

Inflation Rises More Than Expected

On August 15th, Statistics Canada announced that CPI inflation for July increased from 2.80% to 3.30%. An increase was not surprising, but economists were expecting it to rise to only 3.00%. Instead, they got 3.30%.  This is not good, and not what the Bank of Canada was hoping to see.

Does this mean that we can expect the Bank of Canada to increase their rate again on their next scheduled announcement date of September 6th?

While some are expecting another 0.25% hike, most economists are forecasting that they will hold the rate where it is. Of the big six banks, only CIBC is forecasting a 0.25% increase in September. The remaining five are not predicting any movement for the remainder of the year.  But as we are all aware, forecasts can and do change. Eventually, we’ll catch a break where they change in our favour… but lately it’s been the opposite.

All of the big six banks are forecasting no further increases, with cuts totalling 0.75% to 1.50% by the end of 2024. The majority are expecting the cuts to start in the 2nd quarter. We’ll see.

 

Conclusion

Forecasts are always changing.  With a bit of luck, we won’t see any more increases from the Bank of Canada in this cycle. But if inflation continues to remain at elevated levels, then they are prepared to move higher. If there is any doubt in their mind, the BoC will err on the side of caution and move forward with another hike. Let’s hope that’s not the case.

If you have a mortgage coming up for renewal, or a purchase closing within the next 120 days, you’ll want to get a rate locked in ASAP. Some people in this position are sitting on the fence, waiting for rates to drop. Others think if they keep shopping around then they’ll find something lower, only to find that rates have increased by the time they are ready to lock in. Any delay may result in paying higher rates, so you want to ensure you get something locked sooner than later.

The Paul Meredith Team specializes in providing industry leading low-rate mortgages, while providing a better mortgage experience than you’ll get anywhere else.

 

*insured mortgages for purchases only.