Fixed rate mortgages have risen considerably in recent weeks as bond yields have spiked in reaction to the war in Iran.Chris Helgren/Reuters
The Bank of Canada is largely expected to hold its overnight interest rate when it convenes next week, as the economy faces rising inflation and uncertainty around the war in the Middle East.
Implied interest-rate probabilities in overnight index swap markets as of Thursday afternoon suggest a less than 7-per-cent chance of a hike, but the overwhelming expectation is that rates will remain at 2.25 per cent.
A rate hold would mean further stability for variable mortgages, which fluctuate with Bank of Canada rate changes. Fixed rate mortgages, meanwhile, have risen considerably in recent weeks as bond yields (which are the main driver of fixed rates) have spiked in reaction to the war in Iran.
The conflict and its impact on oil shipments through the Strait of Hormuz have led to a notable uptick in inflation. Last week’s Consumer Price Index report found that inflation accelerated to 2.4 per cent in March, up from 1.8 per cent in February.
Gas prices were the major factor, with a 21.2-per-cent increase in prices at the pump in March.
Inflation concerns are one reason why markets are pricing in at least one BoC rate hike by the end of the year, with expectations of potentially two rate hikes.
Long-term interest-rate expectations have been shifting rapidly as the war in Iran evolves. In recent weeks, markets have predicted as many as three rate hikes by the end of the year.
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Mortgage rates are sourced by Ratehub.ca. For a comprehensive list of today’s mortgage rates for each term/type, visit ratehub.ca/best-mortgage-rates.
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Rates shown are the lowest available for each term/type and category (insured versus uninsured) as of market close on April 23.
