Could a new wave of markets optimism lead to higher mortgage fixed rates?

Following a news about a 90% effectiveness of Pfizer’s COVID-19 vaccine, bond yields in Canada and the U.S. rose sharply.

A 5-year bond yield reached 0.50% for the first time since the beginning of June. And as bond yields affect fixed mortgage rates directly, some specialists started talking about a possible mortgage rates increase.

“The deal is that lenders’ profit margins are quite tight already, and higher yields are tightening them even stronger. In case they keep rising, banks may have to raise fixed rates as well,” – noted RateSpy founder Rob McLister.

According to him, although now we’re facing an economic slowdown, better days are coming, as the next year is expected to bring recovery, especially with the strong possibility of a vaccine.

“The bond market seems to share this opinion. As a rule, it prices in good news one to two years in advance,” – McLister said. “It means, by the time the economy returns to the pre-pandemic levels, fixed rates will have already grown.”

Obviously, this news isn’t that good for those who are searching for a mortgage.

In our opinion, the rates will not go up in the nearest future, but if you’re thinking about getting a mortgage it’s still better to get the best rate while it’s available.