Despite a modest rise since the start of the month, bond yields remain more than 50 basis points (0.50%) below their January peak. Since fixed mortgage rates are closely tied to bond yields, Canada’s five largest banks—BMO, CIBC, RBC, TD, and National Bank—have responded by reducing rates across multiple mortgage terms by 0.10% to 0.25%.
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The trend is not limited to major banks. Many independent mortgage lenders have also cut rates over the past two weeks, making the current market more competitive for borrowers.
Economic Pressures Could Shift Rates Again
Mortgage rate expert Dave Larock notes that ongoing economic concerns, including trade tensions with the U.S., have pushed bond yields lower. However, he warns that tariffs and inflationary pressures could reverse this trend, leading to rising mortgage rates in the future.
“While bond-market investors initially reacted to trade war threats by pushing yields lower, tariffs are inherently inflationary,” Larock explained in his latest analysis. “If inflation persists and businesses capitalize on the environment to raise prices, bond yields and fixed mortgage rates could increase.”
Similarly, mortgage strategist Ron Butler predicts that despite the recent rate cuts, future increases could be on the horizon. “The latest U.S. economic forecasts suggest only one quarter-point cut by year-end, or potentially none at all. This could push conventional mortgage rates up by another 20 basis points,” Butler told Canadian Mortgage Trends.
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Mortgage Competition Expected to Heat Up for Spring Market
Despite potential rate fluctuations, Butler anticipates that banks will remain aggressive in competing for mortgage business heading into the spring real estate market.
“I expect intense competition, particularly from RBC and CIBC, which are focusing on retaining their renewals and expanding their market share,” he said. “Banks are ready to compete across all mortgage terms, including high-ratio loans.”
Fixed vs. Variable: Homebuyers Face Tough Decisions
With fixed and variable rates now nearly equal following six consecutive rate cuts from the Bank of Canada, borrowers must weigh potential cost savings against market volatility. The decision hinges on whether borrowers believe rates will stay low or begin to rise again.
Key Developments in the Mortgage Industry
Insolvent Homeowners Face Drastic Equity Declines
Homeowners facing insolvency in 2024 have seen their home equity plummet. According to Hoyes, Michalos & Associates Inc., the average equity value for insolvent homeowners has dropped to just 10%, down from 21% in 2023.
- The average mortgage debt among these homeowners stands at $555,853.
- One in seven (14%) now has negative equity.
- In addition to mortgage debt, insolvent homeowners carry an average of $99,429 in unsecured credit and $34,108 in non-mortgage secured debt.
Financial analysts warn that rising mortgage renewal rates could escalate homeowner insolvencies, potentially doubling the proportion of homeowner bankruptcies to 8-10% in the coming years.
National Bank Finalizes $5.6 Billion Acquisition of Canadian Western Bank
National Bank of Canada has officially completed its acquisition of Canadian Western Bank (CWB), marking a significant expansion into Western Canada. The deal, valued at $5.6 billion, brings 65,000 new customers and nearly 40 branches under National Bank’s umbrella.
Laurent Ferreira, CEO of National Bank, stated: “This acquisition strengthens our ability to serve Canadians nationwide while maintaining regional expertise. It allows us to expand our banking products and services across the country.”
RPS Index Reports 4.65% YoY Increase in Home Prices
Canada’s real estate market continues to show strength, with the RPS House Price Index indicating a 4.65% year-over-year increase in national home prices as of January.
- Quebec led with a 17.26% price increase.
- Calgary, Edmonton, and Winnipeg posted gains of over 10%.
- Toronto and Vancouver saw modest increases of 2.51% and 2.22%.
- Victoria remained the only major market experiencing negative growth, though signs of recovery are emerging.
According to market analysts, the Bank of Canada’s recent rate cuts have fueled optimism, leading to an increase in new home listings and potential buyer activity ahead of the spring market.
Mortgage Arrears Hold Steady Despite Market Fluctuations
Canada’s national mortgage arrears rate remained stable at 0.21% in November, according to the Canadian Bankers Association. While this is an increase from the pandemic low of 0.14% in 2022, it remains low by historical standards.
- Saskatchewan reported the highest arrears rate at 0.59%.
- Quebec and British Columbia had the lowest rates at 0.17%.
- Ontario saw a slight uptick to 0.18%.
Bank of Canada Appoints New Deputy Governor
The Bank of Canada has appointed Michelle Alexopoulos as its new external Deputy Governor, effective March 17, 2025. Dr. Alexopoulos, an economics professor at the University of Toronto, specializes in macroeconomics, technological change, and central bank communications.
The Bottom Line: What This Means for Homebuyers and Investors
With fluctuating bond yields and mortgage rates, borrowers must stay informed about potential market shifts. While competition among lenders remains strong, inflationary pressures and U.S. economic policy could drive rates higher in the coming months.
For those planning to enter the housing market or renew their mortgage, now is the time to shop around for the best rate and consider locking in before further rate changes occur.
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