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North American interest rates are not just falling, they are rising rapidly. The US Federal Reserve is hinting at a possible rate cut in September, inflation is rising and economic data is weaker. It is clear to the markets that high interest rates will not last much longer.
The yield on Canada's five-year fixed-rate mortgage bond is on track for eight consecutive closing lows, a spectacle that usually reflects a dramatic shift in market sentiment.
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In fact, the market now believes that central bank interest rates are heading for a nosedive. Things could heat up on September 18, when traders expect the US to cut its key interest rate for the first time since the pandemic crisis.
The Fed's outlook also increases the odds for Canadian adjustable-rate mortgage borrowers. The market-implied probabilities of a September rate cut by both the Bank of Canada and the Fed are now close to 100 percent, according to Refinitiv data.
Meanwhile, in the fixed-rate mortgage market, the nation's lowest uninsured rates for three- and five-year terms have just come off the floor, down a whopping 20 and 25 basis points, respectively, from last week. With short-term rates in the bond market falling, expect better deals for one- and two-year terms soon.
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Currently the lowest national mortgage rates in Canada
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The gap between variable and fixed rate mortgages is narrowing
With such striking declines in borrowing costs, this rate-cutting cycle is starting to become a reality. It's getting progressively easier to qualify for a mortgage, and that will no doubt increase interest in homebuying. Now all eyes are on Friday's crucial U.S. jobs report to see if it continues the rate decline.
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Robert McLister is a mortgage strategist, rates analyst, and editor of MortgageLogic.news. You can follow him on X at @RobMcLister.
Want to know more about the mortgage market? Read Robert McLister's new weekly column in the Financial Post and find out the latest trends and details on financing opportunities you can't miss.
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Mortgage interest rates
The rates shown below are updated by the end of each day and are taken from the Canadian Mortgage Rate Survey by MortgageLogic.news. Postmedia and Imaginative. Online Inc., the parent company of MortgageLogic.news, receive compensation from certain mortgage providers when you click on their links in the charts.
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