Three things happened this week that matter for your mortgage. Fixed rates moved up twice. The February jobs report came in as the worst in four years. And Tuesday’s Bank of Canada meeting is almost certainly going to produce no change at all. Here’s what it means.
Why Fixed Rates Are Climbing Right Now
If you’ve been watching mortgage rates this week and wondering why they keep moving up, the answer isn’t the Bank of Canada. It’s the bond market.
Fixed mortgage rates in Canada follow the 5-year Government of Canada bond yield, not the overnight rate. When the yield goes up, lenders raise their fixed rates. When it falls, fixed rates follow down. The Bank of Canada controls the overnight rate, which influences variable-rate mortgages and lines of credit. The bond market operates separately.
This week, the 5-year GoC bond yield hit 3.047% – up roughly 40 basis points since mid-February. That’s a meaningful move in a short period of time.
The driver is oil. The conflict in Iran pushed crude above $90 a barrel. Higher oil prices stoke inflation fears. Inflation fears push bond yields higher. Fixed mortgage rates follow the yield. It’s a chain reaction, and it happens fast. Some lenders adjusted their fixed rates twice this week.
The practical implication: if you have a rate hold expiring soon, a purchase closing in the next 60-90 days, or a renewal coming up and you’ve been waiting to lock in, the window you were waiting for may have already been last month. A conversation now is worth having.
Whether the move holds depends largely on how the Iran situation develops. Oil at $100 for a couple of weeks doesn’t fundamentally change the inflation picture. But 90 to 180 days of elevated prices is a different story. Nobody knows which it will be. That uncertainty is itself the problem.
83,900 Jobs Lost – and the Bank of Canada Is Stuck
Statistics Canada released the February employment numbers this morning. Canada lost 83,900 jobs last month – the largest single-month decline since January 2022, when pandemic restrictions were still closing businesses. Economists had expected a gain of 10,000. The unemployment rate climbed to 6.7%, up from 6.5% in January.
Job losses were concentrated in full-time and private sector work. Youth unemployment rose to 14.1%, approaching the recent high of 14.6% recorded last September. The wholesale and retail trade sector saw the largest declines.
In most environments, a jobs number like this would point clearly toward a rate cut. Weak employment means economic slack. Economic slack is exactly the kind of condition that leads a central bank to lower borrowing costs to stimulate growth.
But the Bank of Canada meets Tuesday, March 18, and is widely expected to hold the policy rate at 2.25%. The reason is the other side of this week’s news: rising oil prices are pushing inflation in the opposite direction from where the employment data is pointing. Cutting rates into rising energy costs and inflation fears risks making the inflation problem worse.
Weak economy. Rising prices. Two problems pulling in opposite directions. The Bank of Canada’s response, for now, is to wait. That means variable-rate borrowers shouldn’t expect further relief in the near term, and fixed rates are facing upward pressure from bond markets at the same time.
It’s worth noting that hourly wages for full-time permanent employees rose 4.2% year over year in February, up from 3.3% in January. That wage growth makes it harder for the Bank to justify cuts even when employment itself is deteriorating.
Some Good News if You’re Renewing This Year
Against that backdrop, a TD Economics report released this week offers a more reassuring note for homeowners with renewals coming up in 2025 or 2026.
The report found that the mortgage renewal crisis many analysts had been forecasting has largely not materialized. Two factors absorbed most of the shock: faster-than-expected growth in personal disposable income, and longer amortizations – running roughly 16 months longer on average than pre-pandemic. Together, those forces turned what looked like a cliff into a much gentler hill.
The median payment change at renewal right now is near zero. Mortgage interest cost inflation in Canada, which peaked above 30% year over year in 2023, had dropped to 1.2% year over year by January 2026.
That doesn’t mean renewals are painless – especially for anyone who locked in at 1.5% or 2% in 2020 or 2021 and is seeing rates in the 4s now. But the systemic stress that was anticipated hasn’t arrived in the way many feared.
If you’re renewing in 2026: the math is manageable for most borrowers. But manageable and optimal are two different things. A 30-minute review is worth having before you sign the renewal letter your lender sends you.
The Summary for This Week
Fixed rates are moving up because bond yields are moving up, because oil is moving up, because of the Iran conflict. That could be temporary or it could persist.
Canada’s job market had its worst month in four years, but the Bank of Canada can’t respond the normal way because of inflation pressure from the same global events pushing bond yields higher.
And if you’re renewing this year, the picture is better than the headlines might suggest – but it still pays to review your options before you sign anything.
If you want to talk through what any of this means for your specific mortgage, text or call me at 249-480-1249, or book a Strategy Review a humberbaymortgages.ca/review
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