Fixed mortgage rates are going up amid future rate hikes from the Bank of Canada

Canadian bond yields, which influence fixed mortgage rates directly, went up as the central bank plans to tighten its monetary policy, and a new report from RBC Economics expects more increases in 2022.

According to RBC, both the Bank of Canada and Federal Reserve, will raise their interest rates by 1% starting with March. However, an official quantitative tightening announcements will not be released until spring.

While RBC doesn’t predict any sharp hikes in the nearest future, the Bank of England has already begun its tightening cycle with faster-than-expected rate increases, although it has since admitted that it might have been too soon. At the same time, the European Central Bank has become active and pointed to the future reducing of the monetary stimulus.

The BoC decided not to change its key lending rate in January, but it still made it clear that rate hikes are coming, most likely starting in March, which is earlier than RBC had previously predicted. RBC says the Federal Reserve is the most hawkish in not ruling out an aggressive tightening campaign.

The European Central Bank, worried by growing inflation, seems ready to reduce its quantitative easing program next month, leading the way for rate increases in 2022. RBC has postponed its forecast for Australia’s rate hiking cycle, based on the conclusion of its quantitative easing campaign in February.

Central banks’ trajectory changes have caused volatility in the market, with the S&P 500’s 5.3% decline last month to the worst result reported since March 2020 when the pandemic started. In addition to it, the VIX volatility index also rose to the highest level in a year. More pressure comes from geopolitical tension involving Russia, Ukraine, the US, and probably China, and growing petrol prices, which push the inflation higher.

If you are on the market for a new property or your mortgage is up for renewal soon – apply for a pre-approval as soon as possible and reserve today’s foxed rates for the next 120 days.


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