Banking Videos

Will Higher Mortgage Rates Weigh on Home Sales?

The discussion centered on how rising bond yields, spurred by geopolitical tension in Iran, are lifting Canadian mortgage rates. Since February, yields have climbed roughly 60 basis points, pushing fixed‑rate mortgages from the high‑3% range to roughly 4.49‑4.69%, while variable rates remain anchored between 3.30% and 3.65% as the Bank of Canada holds its policy steady. Ron Butler highlighted the causal chain: the Strait of Hormuz disruption raises oil prices, which fuels inflation expectations, lifts bond yields, and ultimately hikes mortgage rates. He noted that the Bank of Canada appears reluctant to raise rates further unless inflation becomes entrenched, but persistent conflict could force a policy shift. Butler emphasized the oddity of Canadians basing mortgage decisions on a Middle‑East war, stating, “It’s a very unusual time in the mortgage world… we have to think about a war in the Middle East to make a decision about their mortgage rates.” He also warned that a sustained 5% fixed rate would likely dampen home‑sale volumes, even if a short‑term sales bump occurs from borrowers locking in pre‑war rates. If the conflict eases and oil prices fall, bond yields could retreat, making variable‑rate mortgages a safer, lower‑cost option. Conversely, prolonged tension would keep rates high, pressuring the housing market and prompting borrowers to reassess financing strategies.