With bond yields still rising, the latest nationally announced five-year fixed rates fell below 4 percent this week.
Only a few regional providers remain in the top three, including Butler Mortgage (Alberta, BC, Ontario) and RateBuzz (Ontario), but they are quickly disappearing.
Variable rates are now in greater demand than five-year fixed rates, and most are still well below four percent.
The question is, how long will they stay there?
Markets are pricing in just one interest rate hike from the Bank of Canada this year, but some expect it could take at least six months for tanker traffic to return to sufficient levels in the Strait of Hormuz.
With bond yields recently tracking closely with oil prices, expensive crude oil and stubborn inflation remain serious interest rate risks.
Heaven help us if the medium-term inflation outlook begins to unravel, something the Bank of Canada is watching closely. On Monday, the company released its latest business outlook survey and respondents’ two-year expectations rose 60 basis points to 3.40 percent. This is considered medium-term inflation and is 140 basis points above the target.
If markets are indeed underestimating inflation risk, most fixed-rate borrowers will be happy to participate.
Robert McLister is a mortgage strategist, interest rate analyst and editor of MortgageLogic.news. You can follow him on X at @RobMcLister.
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