Trade Tensions Fuel Rise in Fixed Canadian Mortgage Rates

The impact of US trade policy on Canadian mortgage rates is multifaceted and complex. On one hand, ongoing trade tensions have led to a rise in inflation and economic growth worries, prompting the Bank of Canada to maintain its benchmark interest rate. This stability has kept variable mortgage rates in check.

However, the growing concerns about US debt and oil prices are driving up global bond yields, which affect fixed mortgage rates. As investors demand higher returns, fixed rates have crept above 4% for five-year terms, according to Ratehub.ca. In contrast, variable rates remain below 4%.

Mortgage broker David Larock advises borrowers to consider their financial situation and risk tolerance when choosing between fixed and variable rates. He recommends a fixed rate if there's a strong likelihood of breaking the mortgage before its term ends or if one expects rates to rise in the near future.

Larock also suggests opting for a three-year fixed rate, which offers lower borrowing costs but still provides stability during uncertain times. However, he predicts that five-year fixed rates will climb soon due to rising longer-term bond yields.