Back in June, the Bank of Canada hinted that they might be raising prime rate on the next scheduled rate announcement date of July 12th. This alone was enough to put upward pressure on bond yields, which have direct influence on fixed mortgage rates.

As a result, fixed mortgage rates started increasing which were as low as 2.24% early in June. On July 12, the Bank of Canada increased their overnight rate, as they had previously warned. The overnight rate is what prime rate is based on. When overnight rate changes, so does the bank’s prime rate. As this was the first rate increase since September 2010, it sent bond yields soaring upward even further which have in turn pushed fixed mortgage rates higher and higher with them now reaching as high as 3.29% with some lenders. The last time we saw 5 year fixed rates starting with 3 was back in the summer of 2013 when they went up as high as 3.59%.

But have they hit the ceiling?

I wouldn’t count on it. Bond yields continue to trend upwards causing more and more pressure on fixed mortgage rates. If they continue to increase, we’ll see fixed rates increase even further.

The Bank of Canada rate increase on July 12 was the first in almost 7 years, and it’s being predicted that there could be at least one more increase by the end of the year.

So what will this do to fixed mortgage rates?

If they do increase the prime rate again, then we can expect fixed mortgage rates to rise even further. I’d be surprised if a second increase came through however. If it did, it wouldn’t exactly be great news for the real estate market. If the increase doesn’t come through, then I anticipate the bond yields will drop which will in turn bring us lower fixed rates once again.

You can follow the bond yields yourself here: https://www.investing.com/rates-bonds/canada-5-year-bond-yield