06/14/2023
If you haven't heard the news by now, I hate to be the one to break it to you - but it's true; fixed rates increased again this week. I know! The worst. Just as we were all getting cozy with decreased rates and a warmer market and more buyers were flooding back to the market, boom, rates went up with most lenders by about 20-30 basis points.
So what happened to push rates back up, exactly? Well, there are a number of factors that influence fixed mortgage rates, one of the biggest influences is the government bond market - when bond yields go up, we can generally expect fixed rates to follow suit.
Bond yields have surged a couple of times over the past few weeks. Because bonds are a low risk investment, investors buy them up in droves when they are expecting the markets to be volatile. When rates were lower earlier this spring, it was because decreasing inflation and increasing consumer confidence had economists and investors predict strong markets and returns on their riskier investments. When inflation continued to trend downward, yet the job market and GDP remained strong, low-risk bonds weren't as attractive to investors.
But after the Bank of Canada's surprise rate increase, forecasted decrease in consumer activity and ultimately a market slowdown market volatility is trending. So back investors went to their nice, safe government bonds to protect their cash from any volatility that may result from a potentially harder economic landing.
Although there is no direct correlation between the Bank of Canada overnight rate and fixed mortgage rates, a deeper economic decline could push investors back to nice, safe government bonds and drive yields up further. This, you guessed it, would more than likely push fixed rates up further, too.
But none of us have a crystal ball, so the best thing we can do is wait and watch carefully as the next few weeks roll out. The second best thing you can do, if you are planning to buy or refinance this summer, is to get the process of obtaining a rate hold started ASAP. This means that we can lock in today's rates for you for up to 120 days, so, in the event that rates to increase again, you can go forth with confidence.
