Latest in Mortgage News: Are fixed mortgage rates about to take another leg higher?

There’s speculation that fixed mortgage rates, which have continued to trend higher over the past several weeks, are set to rise even further.

That’s because the Government of Canada 5-year bond yield, which typically leads 5-year fixed mortgage rate pricing, rose above a key threshold of 4% today. Given that 4% has served as a key resistance level for the past several months, rate experts say that sustained levels above 4% could pave the way for mortgage rates to continue pushing higher. “If the yield on the 5-year Canadian bond can break 4.00%, hold over 4.00% for at least a session or two, then we could be looking at much higher yields,” Ryan Sims, a TMG The Mortgage Group broker and former investment banker, wrote on his blog. “If we break through 4.00%, then 4.40% looks pretty easy to hit.”

However, should yields fail yet again to remain above 4%, Sims says there’s a strong likelihood rates will trend down from here. “As of right now the bond yield looks to be putting in a ‘triple top,'” he added. “If we cannot break 4.00% decisively, then lower yields should be on the horizon. Most of the big banks, including CIBC, RBC, Scotiabank and TD, and countless other mortgage providers have increased their fixed mortgage rates over the past week.

A majority of young people now believe that buying a home is further out of reach compared to when their parents were their age. That’s according to the results of a new survey from Ipsos. The survey also found that 68% of young people between the ages of 18 and 44 believe buying a home is further out of reach compared to when their parents were younger.

As a result, 68% of Canadians who currently don’t own a home and who intend to buy one plan to wait until interest rates start falling before they do so. Another 69% who had planned to refinance their mortgage have also postponed their plans until rates drop. Half (51%) say their concerns stem from the current economic conditions and 18% said they plan to defer their home purchase until 2024 or later. Another 20% said they are no longer sure if they will purchase a home. A British Columbia mortgage broker has been fined $50,000 by the province’s financial sector regulator after admitting to forging documents for five separate clients.

In a consent order posted by the BC Financial Services Authority (BCFSA), Ravinder Biln, a submortgage broker with Kraft Mortgages Canada and doing business as Architects Kraft Mortgages Canada, was found to have conducted mortgage business “in a manner prejudicial to the public interest.” “Between September 2017 and June 2018, Ms. Biln created income documents in support of mortgage applications when she knew that the information contained in the documents was inaccurate and misleading,” reads the agreed statement of facts.

The consent order noted that Biln had been unlicensed since March 2020 and “does not intend to return to the mortgage industry.” She waived her rights to a hearing and agreed to pay the BCFSA a $50,000 administrative penalty, which is due immediately. On Wednesday, credit ratings agency Fitch downgraded U.S. debt to an AA+ rating, down from the highest rating of AAA. Fitch said the downgrade reflects “expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance.” This is only the second time in history that a leading credit agency has downgraded U.S. debt, the first being in 2011, when Fitch rival Standard & Poor’s cut the US’s triple-A rating after the Republican and Obama administration standoff over the federal budget.

Fitch also said it expects the U.S. economy to slip into a “mild” recession in the fourth quarter of this year and first quarter of 2024. Former Bank of Canada Governor David Dodge has warned that a prolonged period of elevated interest rates will be necessary for the central bank to achieve its 2% inflation target.

Despite signs of a modest cooling down in Canada’s economy, Dodge told BNN Bloomberg that rates will need to stay high for the next two years to reach the desired inflation target. “It’s going to be a long period of what would be considered elevated interest rates…right through 2024, right into 2025,” he was quoted as saying. “It makes it very hard to achieve disinflation when we continue to have growth and when we continue to have by historical standards pretty robust labour markets.” Dodge predicts slow growth of about 1%, but expects the economy to avert a recession.