Bond yields play a crucial role in determining fixed mortgage rates. Recently concerns over a potential US - Canada trade war have pushed bond yields lower, prompting lendings to cut mortgage rates. However, experts warn that this trend may not last.
Based on a recent news article by The Canadian Press on January 29 2025. Mortgage rate analyst Dave larock points out that while tariffs and trade tensions are driving bond yields down in the short term, they could fuel inflation in the long run. “Tariffs are fundamentally inflationary,” he explains, meaning that if higher prices persist, we could see bond yields and fixed mortgage rise again.
What Does This Mean for Borrowers?
For those in the market for a mortgage, this rate drop presents a potential window of opportunity. However the landscape remains competitive. The expectation is that the banks will be aggressive in the spring real estate market, with lenders fiercely competing on renewals and high-ratio mortgages.
Meanwhile, variable mortgage rates - thanks to six consecutive Bank of Canada rate cuts - are nearly on par with fixed rates.
Key Takeaways:
Fixed mortgage rates are dropping, but experts warn they may not stay low for long.
Trade war concerns are pushing bond yields lower, but inflation risks could reverse the trend.
The spring market is expected to be highly competitive, with banks vying for borrowers.
Fixed and vairable rates are now nearly equal, making mortgage decisions more difficult.
If you are considering a new mortgage or renewing your existing mortgage, talk to a mortgage specialist. Now might be the time to lock into a rate before any potential increases. If you are thinking of making a move or you have a real estate question reach out to me anytime. We can chat about your goals and see if it is the right time for you!
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