Canadian Mortgage Rates Follow U.S. Fed Rate Hike with Controlled Pace

When the U.S. Federal Reserve (Fed) raised its rates on September 16, many expected Canadian mortgage rates to follow suit.

However, despite initial expectations, fixed mortgage rates in Canada didn't spike overnight.

This was due in part to the Fed's new chair, Kevin Warsh, signaling a commitment to keeping long-term inflation in check, which temporarily lowered inflation risk premiums across North America.

In the months that followed, fixed mortgage rates did move higher but at a controlled pace, rather than a sharp spike.

A historical analysis of the past 30 years shows that when the Fed initiates a policy tightening cycle, the Bank of Canada (BoC) and Canadian mortgage rates tend to follow predictable patterns.