Canadian Fixed Mortgage Rates Climb as Bond Yields Rise Despite Steady Central Bank Policy
Fixed mortgage rates in Canada have increased over the past month, with the lowest five-year insured rate rising to 4.34 per cent. The increases are driven by Government of Canada bond yields rather than the Bank of Canada's policy rate.
Fixed mortgage rates in Canada have moved higher over the past month even as the Bank of Canada has maintained its policy rate. The lowest five-year fixed rate for an insured mortgage is currently 4.34 per cent, up from 3.94 per cent a month ago. For refinances and other uninsurable mortgages, the lowest available rate has climbed to 4.64 per cent from 4.24 per cent over the same period.
These increases reflect movements in Government of Canada bond yields rather than changes to the central bank's policy rate, which primarily influences variable-rate mortgages. Lenders' costs closely follow five-year government bond yields because fixed-rate mortgages share features with government bonds, such as fixed payments over a set term. Insured mortgages remain cheaper than uninsurable ones because mortgage default insurers carry the default risk.
While bond yields move almost every day, fixed mortgage rates typically change only once every week or two. Lenders also tend to be quicker to raise rates than to cut them. Over the past 12 months, the five-year bond yield climbed about 80 basis points, while the lowest five-year mortgage rate rose only about 45 basis points.
A common rule of thumb for estimating fixed mortgage rates is to take the average five-year bond yield over the past two weeks and add 0.8 to 1.0 percentage points. The gap between the lowest five-year insured rate and the bond yield averaged about 1.0 in 2025 and about 0.8 in 2026.
Several factors are keeping spreads lower this year. Competition among lenders chasing renewals of mortgages originated in 2020–21 has placed downward pressure on pricing. Additionally, beliefs that geopolitical tensions in the Middle East might ease are influencing expectations for future bond yields and mortgage rates. These dynamics suggest competitive pressure on lenders, even as rising fixed mortgage rates increase borrowing costs for homeowners despite stable central bank policy rates.