Bond yields pulled back this week after climbing sharply through March. Ontario’s HST rebate on new construction is now live as of April 1. And Toronto’s housing affordability, after two years of steady improvement, is starting to stall. Here’s what it means for your mortgage.
Wishing everyone celebrating a happy Easter and a happy Passover this weekend.
Bond Yields Pulled Back – But Rates Went Up Anyway
The 5-year Government of Canada bond yield, which drives fixed mortgage rates, climbed sharply through the last two weeks of March – hitting close to its 1-year high of around 3.35. This week it pulled back, sitting at 3.089 as of this morning, down about 3.74% on the week.
That sounds like good news. But several lenders actually raised their fixed rates further this week, even as yields eased.
Why? Because the relationship between bond yields and lender pricing isn’t automatic or instant. Lenders make their own decisions about when and how much to move, factoring in their own funding costs, competitive positioning, and appetite for new business. When yields spike fast, as they did through March, lenders sometimes lag on the way up. When yields ease, they don’t always rush to pass that on either.
The bigger picture is that we’re still in the upper range of where yields have been over the past year – well above where they sat through most of 2025. And the whole situation is being driven by events that are genuinely hard to predict. The conflict in the Middle East, oil prices, and a US president whose statements can move global markets in a single news cycle are all factors right now.
My Take: This is a day-to-day story right now, not a settled trend. Yields could ease further if there’s progress toward a peaceful resolution in the Middle East – and there have been some signals this week that the US may be looking to exit the conflict. Or they could reverse. Nobody knows, and anyone who tells you otherwise is guessing. If you’re shopping now and don’t have a rate hold in place, that conversation is worth having. A rate hold costs nothing and locks in today’s rate for 120 days.
Ontario’s HST Rebate Is Now Live – And It Got Bigger
As of April 1 it’s real.
Ontario is temporarily removing the provincial portion of the HST on newly constructed homes. The HST is 13% total – 5% federal and 8% provincial. Ontario is now covering the provincial component, making the full 13% exempt on qualifying new builds up to $1 million. That’s a maximum rebate of $130,000. Scaled relief extends up to $1.85 million. The program runs until March 31, 2027.
What’s new this week is the development charge story. The federal and Ontario governments announced a combined $8.8 billion commitment – $4.4 billion each – to help municipalities cut development charges by up to 50% for the next three years. Development charges are fees municipalities impose on builders that get passed directly to buyers – they account for 8% to 16% of a new condo’s price in parts of Ontario.
Taken together, governments estimate combined savings of up to $200,000 in taxes and fees on the cost of a new home.
Toronto Affordability – The Easy Gains Are Done
For two years, housing affordability in Canada improved steadily. Interest rate cuts drove ownership costs lower, quarter after quarter. But that progress is now stalling – and Toronto is feeling it.
RBC’s national affordability measure, which tracks the share of pre-tax household income needed to carry a home, improved for eight consecutive quarters. But the pace of quarterly improvement has slowed sharply – from an average of 1.6 percentage points per quarter to just 0.4 points in the second half of 2025.
In Toronto, buyers still need 62.9% of their pre-tax household income to carry an average home. That number has improved from its peak, but it remains extraordinarily high by any historical standard.
The reason the improvement is stalling is straightforward. The gains came largely from falling mortgage rates as the Bank of Canada cut rates through 2024 and into 2025. With the Bank now holding at 2.25%, prime being at 4.45%, and expected to stay there through 2026 – and with some forecasters now calling for rate hikes in the second half of the year – that tailwind is largely spent.
RBC’s economist put it plainly: further improvement now depends on home prices falling and household incomes rising. Not on cheaper debt.
What This Means for You
Fixed rates are still elevated and moving day to day. If you have a purchase or renewal approaching, get a rate hold in place.
Ontario’s HST rebate is live and new construction math has genuinely changed. If that’s part of your plans, the window is open now.
And if you’ve been waiting for Toronto affordability to improve meaningfully before buying – the data suggests that improvement is going to be slower and harder from here.
Connect with me at 249-480-1249 and I’ll show you what this week’s news means for your specific situation.
Sources
- Canadian Mortgage Professional, March 31 & April 1, 2026
- RBC Economics Housing Affordability Report, Q4 2025
- Investing.com, Canada 5-Year Bond Yield, April 3, 2026
- The Canadian Press / CMT News, March 30, 2026
- Bloomberg / CMT News, April 1, 2026
Want to discuss your specific situation?
Whether you’re renewing, buying, or just want to understand where you stand, I’m happy to talk it through. No cost. No pressure. Just clarity.