Canadian mortgage rate and bond yield pressures

Canadian homeowners are facing increased financial pressure due to rising bond yields, which anchor fixed mortgage rates. An analysis by the C.D. Howe Institute notes that the five-year Government of Canada bond yield has risen to 3.7 per cent from less than 1 per cent. The Canada Mortgage and Housing Corporation (CMHC) estimates that approximately one million mortgages are due for renewal in 2026, with the Bank of Canada suggesting about 60 per cent of outstanding mortgages will renew in 2025 or 2026.

Following these market shifts, all six of Canada’s major banks—CIBC, TD Bank, BMO, National Bank, RBC, and Scotiabank—have implemented increases to fixed mortgage rates, with some adjustments reaching as much as 0.5 percentage points. These hikes are driven by rising bond market yields rather than direct changes to the Bank of Canada’s policy rate.

While the Bank of Canada has maintained its key policy interest rate at 2.25%, financial markets have increased expectations for a potential central bank rate hike. Overnight swap-market pricing suggests an approximately 80% probability of an increase at the upcoming October 28 meeting, up from 30% just a week prior, due to inflation concerns and rising energy prices.