FIXED MORTGAGE RATES COULD RISE IN 2027, EVEN IF THE BANK OF CANADA HOLDS STEADY
Moody’s Analytics says fixed mortgage rates could rise next year, even if the Bank of Canada holds steady through most of it. Governments and companies investing in artificial intelligence are borrowing heavily, which pushes bond yields up, and Moody’s says mortgage rates are likely to follow.
The 5-year Government of Canada bond yield, which fixed rates are priced from, rose almost 0.2 of a percentage point this week, to about 3.55 per cent. A Bank of Canada survey of analysts expects it to stay near 3.5 per cent, and expects one more quarter-point increase from the Bank, then no change through 2028. Markets now see roughly even odds of an increase on December 9.
What this means for your mortgage: Fixed rates follow the 5-year bond yield, so that is the number to watch if your renewal or purchase is coming up. Variable rates follow prime, which moves with the Bank of Canada. The two can move in different directions, which is the case in this outlook.
BIG BANKS AND HOMEBUILDERS ASK OTTAWA TO LOOSEN THE MORTGAGE STRESS TEST FOR NEW HOMES
The big banks and homebuilders have sent Ottawa a 29-point housing plan. The main request is a looser mortgage stress test for first-time buyers of new homes.
Today’s test requires qualifying at 5.25 per cent or the mortgage rate plus two points, whichever is higher. These are requests. Nothing has changed.
What this means for your mortgage: Qualifying today works the same way it did last week. Your borrowing power is based on the current test, and any change would only matter if Ottawa decides to act on the request.
518,000 CANADIANS FELL SHORT ON HOME BUYERS’ PLAN REPAYMENTS FOR 2025
New Canada Revenue Agency numbers show 1.23 million Canadians had a Home Buyers’ Plan repayment due for 2025. That plan lets first-time buyers borrow from their RRSP for a down payment, then pay it back over time.
About 518,000 of them fell short, and 476,000 of those paid nothing. The unpaid $456 million was added to their taxable income.
What this means for your mortgage: A missed repayment doesn’t affect a credit score, but it can mean an unexpected tax bill. If you bought with the Home Buyers’ Plan, build the yearly repayment into your budget alongside your mortgage payment.
WHAT LENDERS ARE DOING THIS WEEK
Lenders trimmed their fixed rates early this week, then started raising them again on Friday as bond yields climbed. One lender added 0.10 of a percentage point to every fixed rate, and another said its rates would rise at midnight.
If you’re shopping for a new home, ask about a rate hold to protect yourself from rising rates.
Call or text 249-480-1249. HumberBayMortgages.ca.
Simon Browning | Mortgage Agent Level 2 | BRX Mortgage 13463
Sources: Moody’s Analytics (reported by Canadian Mortgage Trends), Canada Revenue Agency, Bank of Canada survey of analysts, Government of Canada 5-year bond yield data, lender rate bulletins.