The Latest Mortgage News: Bond Yields Soar, Fixed Mortgage Rates Set to Follow

Bond yields hit a new 14-year high this week, fueling expectations that fixed rates will continue to rise.

As we reported last week, the yield on 5-year Government of Canada bonds was already up, crossing the 3.20% threshold. Well, on Monday it broke through the 3.51% barrier.

This is important because the yield on 5-year bonds is the best indicator of future movements in 5-year fixed mortgage rates.

Fixed mortgage rates have already trended higher, with discount rates available nationwide averaging 4.80% for uninsured mortgages (those requiring a minimum 20% down payment), while average insured rates rose to an average of 4.57%, according to data tracked by Rob McLister, rates analyst and editor of

With bond yields up 20 basis points from Friday, borrowers should expect 5-year fixed rates “likely to rise again this week,” noted Integrated Mortgage broker Dave Larock. Planners, in his latest blog post. “This next round of increases will push the five-year fixed rates offered by most lenders above 5% (about double what they were at the start of this year).”

Magenta Capital Corp. suspend new requests

One of the country’s largest private lenders will not accept new loan applications until September, according to a Globe and Mail report.

Magenta Capital Corp., a mortgage investment company (MIC), reportedly made the announcement in an email to its brokerage clients, without providing a specific explanation as to why.

The Globe story quoted Magenta CEO Albert Oppenheimer in the company’s email as saying, “I understand this is an inconvenience to you and your customers.”

“There will be so many more of these Mortgage Investment Corps suspending loans over the next eight weeks,” Butler Mortgage’s Ron Butler predicted in a tweet. “When your modeling suddenly shows values ​​down 5% per month in certain markets, what else can you do?”

Founded in 1994, Magenta is now one of the largest MICs in the country with $430 million in mortgage assets under management.

Fed rate decision preview: 75bp hike expected

The next big interest rate decision comes this week from the Federal Open Market Committee (FOMC) in the United States.

While a 75 basis point rate hike was still in play, the odds of such an oversized move rose significantly after Friday’s new reading of 8.6% inflation at a 40-year high for May. .

“The most likely triggers for a shift to a more aggressive pace of tightening are the upside surprise in the May CPI report and the further rise last Friday in Michigan’s consumer survey measures of long-term inflation expectations which have likely been driven largely by further increases in gas prices,” Goldman chief economist Jan Hatzius and others wrote in a note.

Such a move would put additional pressure on the Bank of Canada to consider a similar hike on this side of the border to tackle our own 30-year high inflation readings.

“Given the higher odds of the Fed increasing the magnitude of likely hikes in July with June risk, this makes it much more likely that the Bank of Canada will hike by more than 50 basis points at its meeting. July and likely 75 basis points,” Scotiabank economist Derek Holt wrote. “Both central banks are absurdly behind where they should be.”

Housing service costs as bad as 1989: BMO

With interest rates rising to current levels, mortgage servicing costs are now as bad as they were in 1989, according to a BMO report.

“…and that’s with five-year fixed mortgage rates closer to 5% than 12%,” noted report author Sal Guatieri.

He noted that the current housing “frenzy” has pushed debts to an all-time high.

“About 19% of households owed more than 350% of disposable income in 2021, a record high,” Guatieri wrote. “The frenzy was due to ‘extrapolative price expectations’, or fear of missing out on future price gains.” He added that investors largely “led the mania”, accounting for more than 22% of sales in 2021, compared to 19% in 2019.

“They also extracted increasing amounts of equity from their appreciation investments to, yes, buy more homes,” the report said. “This group will be the first to pull out, and if they start selling en masse, the price correction could accelerate.”

Majority of Canadians are worried about their ability to afford a home

A majority of Canadians (56%) say they are very (30%) or somewhat (26%) concerned about their ability to buy a home or pay rent. This is revealed by Statistics Canada’s latest Portrait of Canadian Society survey published last week.

The level of worry is even more worrying among young Canadians. People aged 15 to 29 (53%) and 30 to 39 (39%) were twice as likely as those over 40 (20%) to say they were “very concerned” about their ability to cope. pay for housing or rent.

“These concerns have led to behavioral changes among Canadian youth and young adults,” StatCan noted. “In the six months prior to the survey, 39% of 15-29 year olds and 38% of 30-39 year olds said they wanted to buy a home or move to a new rental but decided not to because of worries. price, compared to with 24% of the total population.

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