The yield on Canada's 5-year bond climbed on Tuesday to a 16-year high of 4.17%, up from 2.66% in March, as investors gave up on the notion that the Bank of Canada and other major central banks will pivot quickly to rate cuts.
It means that when roughly 20% of Canadian mortgages come up for renewal in the next year, it will likely put many borrowers in a tougher financial spot than they could have expected just a few months ago. Mortgage rates tend to track moves in the bond market with a lag. At 6.79%, the five-year mortgage rate posted by major Canadian banks has climbed to its highest since November 2008, data from the Bank of Canada shows.
"That is a flaw in a stress test which hopefully will be changed at some point. ... You're going to see more consumers than usual sticking with their lenders," Laird said.above the Bank of Canada's target range, while robust economic growth, particularly in the United States, has fanned fears of rates staying higher for longer.