The impact of mortgage on Canadians
For those with mortgages, the BOC announcement is interesting.
Impact on variable interest rate mortgage
Variable mortgage rates are most directly affected by changes in BOC overnight loan rates. The rate at which this trend is set will affect the quality interest rates Canadian lenders use with their variable mortgages as well as other major loan chain products such as loans and HELOCs. These products are based on the highest interest rate, and another percentage.
Thanks to today’s BOC interest rate holding, the impact on variable credit loan borrowers will be…NADA. Their payments and the portion used for interest costs will remain the same. Those who are buying variable mortgage rates will also find that the pricing environment is small, although lenders do sometimes turn their spreads into favorable rates, which may cause new variable mortgage prices to rise or fall slightly.
Impact on fixed interest rate mortgage
Fixed mortgage rates are not directly affected by the rate movement of the BOC, but by what is happening in the bond market. Therefore, when bond yields fall, lenders tend to convert their discounts to fixed-rate pricing, and the opposite is true when yields rise. Moreover, the yields in recent weeks have been in quite a lot of places.
Canada’s five-year government bond yields largely supported the five-year fixed mortgage rate, falling to 2.52% on April 4, not seen in three years as the market responded to Trump’s initial threat to many countries’ “reciprocity” tariffs. At that time, Canada had a lower fixed mortgage rate.
However, a strange market phenomenon followed. Despite the ongoing disaster in the stock market, bond yields accumulated (usually during periods of uncertainty) have begun to rise again. Especially the fiscal rate of return in the United States in 10 years. It is the global benchmark for debt and is regarded as the safest investment in the world. Well, in a few days it rose by 40 basis points. This reflects investors’ confidence in U.S.-backed assets, fearing that the current administration is neither aware of its own tariff plan nor its impact on the market.
This puts upward pressure on Canadian yields, starting from publication time, within the range of 2.6%. While fixed rates are still competitive at the moment (currently the lowest five-year mortgages in Canada at 3.79% and 3.74% in Quebec), they may start to be higher if yields keep rising.
Check the rates below to view the current status of Canadian mortgage rates.
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What does this mean for the housing market?
The national housing figures are getting hotter in March, and this is not a pretty photo. The latest data report from the Canadian Real Estate Association (CREA) shows that monthly home sales fell 4.8% and 9.3% year-on-year. Similarly, the sales to new listing ratio (SNLR) has dropped to 45.1%, a low never seen since 2009. This ratio measures the level of competition in the housing market and shows that demand has cooled significantly compared to the stocks currently sold.
