A home for sale in Toronto in December, 2021. Inflation reached 2.8 per cent in April, an increase from 2.4 per cent in March, according to Statistics Canada.Carlos Osorio/Reuters
Mortgage rates are facing more upward pressure as inflation continues to rise and bond yields spike.
Statistics Canada reported this week that inflation reached 2.8 per cent in April, an increase from 2.4 per cent in March and the highest annual inflation rate since May, 2024.
The increase was largely driven by gas prices, which are surging as a result of constricted oil exports from the Middle East as a result of the war in Iran.
Energy costs haven’t spilled over into other sectors yet – grocery inflation actually decreased between March and April – but economists say inflation could become widespread if the conflict continues.
That could eventually force the Bank of Canada to hike rates. The BoC is set to make its next rate decision on June 10. Bond swaps markets are largely predicting that rates will remain unchanged next month. However, markets have priced in expectations of one or two quarter-point rate hikes by the end of 2026.
Meanwhile, the Canada five-year bond rate – a major driver of fixed mortgage rates – has been on a wild ride this week. It rose to its highest level in 22 months at 3.39 per cent on Tuesday, and has since settled at 3.2 per cent on Thursday afternoon.
The current level is still higher than in recent months, and Ratehub’s lowest advertised three-year mortgage rate recently jumped by 10 basis points to 4.19 per cent as of Thursday afternoon.