Fixed Mortgage Rates Increasing - Best Mortgage Broker Rates

Fixed Mortgage Rates Increasing - Best Mortgage Broker Rates

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Everywhere you look, there is news about mortgage rates falling. While this is expected, it may not happen quite as fast as we’re hoping for. It’s also never a straight path down and there can be some bumps along the way.

While it’s possible that we could still see cuts from the Bank of Canada before the end of the 2nd quarter, fixed mortgage rates can move in either direction at any moment. Although we have not yet seen any formal hikes in fixed mortgage rates, they are now battling upward pressure.

Fixed Mortgage Rates and Their Relation to Bond Yields

Numerous elements can affect the way mortgage lenders set their fixed rate mortgages, with bond yields being a significant influencer and a critical signal for predicting fixed rate movement. Bond yields can be volatile, capable of shifting in either direction at any moment.

As the yields have been rising nearly every day for almost two weeks, they are in a clear, upward trend. A lender’s profit margin is tied directly to the bond yield; as yields rise, their margins shrink, eventually leading to an increase in fixed rates.

We received notice from one lender already that they will be increasing their fixed rates as of midnight tonight. It’s possible that we’ll see others follow, but they may choose to monitor the bond market further before making any moves. If the upward trend continues, then it’s almost certain that we’ll see more lenders increase their fixed rates.

Special Mortgage Rate Pricing

Most lenders share their precise rates with us, yet a select few provide us with special pricing, which can be significantly lower than their standard rates. While we have a general expectation of the rates they offer, the exact rate cannot be confirmed until we receive your approval from the lender’s pricing department. If the bond yields surge at the time your file is reviewed, it could mean receiving a higher rate than initially expected. Conversely, a substantial drop in yields could lead to a lower rate being offered.

While these lenders may not have officially increased their rates, the increase in bond yields has resulted in rates coming back 0.10% to 0.15% higher than expected. This is exactly why we quote a range in rates when using these lenders.

Possibility of a Delay in Rate Cuts

The surge in the bond market may indicate dwindling confidence in the Bank of Canada’s anticipated rate cuts happening as soon as many had hoped. With ongoing market volatility, pinpointing the exact moment for these anticipated cuts from the Bank of Canada remains uncertain. Although four out of the six major banks foresee the initial rate cut occurring by the end of the second quarter, adjustments pushing these expectations into the third quarter are both possible and plausible. However, there’s no certainty that the cuts will materialize even then. While cuts are expected this year, the precise timing remains unpredictable.

Conclusion

Whenever bond yields are trending upward, fixed mortgage rates are in danger of increasing. Anyone with a mortgage renewal or purchase closing within the next 120 days should get a rate locked in as soon as possible. While it’s possible that this is just a temporary blip, we cannot say that for sure. If I had to guess I would say it is, which would mean that we’ll soon see the yields trend back downward. But we certainly can’t count on it.

Securing a mortgage approval to lock in a rate doesn’t mean that you need to close with that rate. We’re always monitoring the rate market and get our client’s rates dropped regularly before closing when the opportunity is there to do so. Sometimes just a few business days before closing. But that’s only possible if bond yields begin to trend back down. This is why it’s best to lock in a rate now, which ensures that you won’t get stuck with a higher rate by waiting. There are currently fixed rates as low as 4.59%, depending on your situation.

The next Bank of Canada announcement is next Wednesday, April 10th. While anything can happen, it’s highly unlikely that we’ll see any movement in either direction. The following announcement on June 5th could be a different story. Time will tell.

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Paul Meredith is the author of the Amazon #1 best selling book, Beat the Bank – How to Win The Mortgage Game in Canada, and has ranked as one of the top 75 mortgage brokers in Canada since 2016. He was a finalist for Mortgage Broker of the Year in 2018 - 2021, 2023, and can be seen as the exclusive mortgage broker on season 2, 5-7 of TV’s Top Million Dollar Agent.(Global, Slice TV and Rogers)