Fixed mortgage rates are set to rise since benchmark bond yields are climbing. Get your pre-approvals asap.

More and more lenders warn about coming hikes in their fixed mortgage rates. Such changes are emerging amid the strengthening Canadian dollar and the latest increase in bonds benchmark yield.

On Wednesday, the Canadian dollar went up against its U.S. counterpart as risk appetite rose and investors increased their bets on another interest rate hike by the Bank of Canada. However, it was still not enough to take the loonie out of its recent range.

The Canadian dollar was trading 0.3% higher at 1.3445 per U.S. dollar, or 74.38 U.S. cents, heading closer to the middle of its range since the beginning of the month (about 1.33-1.36).

It went up even in spite of the hikes for the U.S. dollar against a number of major currencies.

“The loonie follows risk markets higher and oil markets higher, but the broader picture shows that we’re really rangebound,” – noted Michael Goshko from Convera Canada ULC.

“Traders are not ready for any significant commitment until the whole U.S. debt ceiling issue is taken care of.” “The optimism concerning a potential breakthrough from the deadlock in Washington on the nation’s debt limit raised U.S. stock indexes and the price of oil – one of Canada’s main exports. U.S. crude oil futures rose in price by 2.8% to $72.83 a barrel. The increase for the loonie followed Tuesday when the data showed the annual rate of inflation growth in April for the first time in 10 months.

As a result, money markets started betting on another rate increase by the BoC in 2023 instead of the previously expected rate cuts.

“We are definitely seeing a lot of reasons for the central bank to think about raising rates,” – Goshko noted.

The Canadian 2-year yield reached its highest level since March 10 at 4.072% before going down slightly at the end of the day. Meanwhile, 3 and 5-year yields are also going up meaning we’ll see the corresponding fixed mortgage terms also becoming more expensive.

If you are on the market to buy some real estate or your mortgage is up for renewal within the next 3-4 months – get your mortgage pre-approval asap.


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