Could Fixed Rates Be Set To Rise?

After hitting a low around 3.26% in January, the Government of Canada 5-year bond yield—which typically leads fixed mortgage rates—finished Tuesday’s session at 3.63% after reaching an intraday high of around 3.66%.

I don’t think the sky is falling. But it may also be a good time to get your pre-approvals in, get your rates locked in.


Monday and Tuesday were the two worst days we’ve seen in equity markets in quite some time. The Dow Jones, the S&P 500, and the tech-heavy NASDAQ all took it on the chin. Now, of course, perspective matters, and those indexes are coming off their best first-quarter returns in about six years. So, this was probably a bit of rebalancing—and that spills over to the bond market.


Yes, rates have gone up a lot in the last two or three trading sessions, but that could just be portfolio shifting, and could normalize in the coming days, and weeks.


Watch for fixed rate drops in the second half of the year


The second reason that fixed rates could be heading up is due to current pricing. Yes, rates should come down this year, but possibly not until late Q3 or early Q4, and I don’t think they come down as much as everyone thinks.


Fixed rates tend to front-run the Bank of Canada overnight rate. If the market thinks BoC will drop the overnight rate in three months, then fixed rates will start moving down today. Fixed rates had a substantial discount baked into them, and now the market is thinking maybe it was too much, too fast.


BoC Governor Tiff Macklem himself has said on numerous occasions that they will hold rates until they see inflation sustained at 2.00%, or at least close to that mark. We are nowhere near that.


The Federal Reserve has also said they only see three rate cuts this year, even though 90 days ago they saw eight. By June, that could fall to three, one or even zero, which isn’t out of the question.


Running the numbers on fixed vs. variable


A simple bit of math tells you something was wrong. For an insured variable-rate mortgage (VRM), you’re currently looking at pricing of around prime -0.70%. That would give you a rate of roughly 6.50%. A 5-year fixed could be had for 4.99%, so that’s a 151-bps difference.


In order to see a 151-bps drop on the prime rate, you would need about six quarter-point rate cuts. Now, you might get one or two cuts this year, and maybe three in 2025, and then a couple early in 2026.


But keep in mind that two years from now, even if you get six cuts to bring the VRM on par with the fixed, you still overpaid for the first six months by 151 bps, then 101 bps for another three or six months, then 76 bps, etc.


For the VRM to balance out with a fixed rate at 4.99%, you would need around 10 rate cuts (depending on the timing of said rate cuts, of course). And it’s possible we won’t see 10 cuts—for a total of 250 bps—over the next 5 years.


Yes, rates will go down, but not by that much. If the BoC does 10 rate cuts in, they would re-ignite the smoldering housing market and we’d be back at square one. All that pain for nothing.


Simple math in the market is telling you that the fixed market had baked in too many rate cuts too soon, and so it is righting the ship by firming up those rates. This is bond arbitrage 101.


We could see a 5-year fixed settle at around the 5.49%-ish range before the bond market thinks we are back in balance.


The role of government spending


Another reason we are seeing fixed rates creep up is politics. The Liberals will unveil their budget on April 16, but they are already pre-announcing billions in spending. The problem is that the government doesn’t have the money, so they will need to borrow by issuing government bonds.


The more they borrow, the riskier they become, and so interest rates need to go up to cover off the increased risk. Quite simply, the more the government borrows, the higher interest rates should go to compensate for the risk.


Traders seeking safety in gold


To add a little more onto the pile of problems, gold has had a record run at its all-time highs (non-inflation adjusted), which is starting to worry some traders that a problem could be coming. When people think economic uncertainty is on the horizon, they buy gold and USD. They don’t buy Canadian government bonds, especially when the government is spending like drunken sailors on shore leave.





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Bayfield Mortgage Professionals



Changing Times and A New Normal

its been a tough time for everyone and some of us have spent alot of time at home.Others front liners have worked very hard for us. Thank you for all you have done.

The folks who stayed home spent more time with their families, perhaps time to get some yardwork and planting done, work on the interior and exterior of our homes, play some board games (got away from the cell phones), crafts,  time to walk the dog and consequently get into better condition ourselves. My daughter brought out the sewing maching and starting making a few summer outfits. Craft time and play time. 

I did alot of these things and also took the opportunity to work towards my MCNE designation, which is Master Certified Negotiation Expert. I have got it done. I am looking forward to using these skills to negotiate for my clients in this new and interesting Real Estate marketplace. Give me a call or text at 250-319-3876 and lets talk. Also email me at or Denise Bouwmeester on facebook. 


Being a native of Kamloops has allowed me to watch Kamloops grow into the fifth largest city in BC, one of people and a four season destination. This city has a wide array of job opportunites, various option for leisure activities, Thompson Rivers University, unique educational options and a friendly place to call home. 

Kamloops offrs a wide range of career opportunities presented by Interior Health Agency, School District #73, Highland Valley Copper Mine, Thompson Rivers University City of Kamloops, BC Lottery Corporation, New Gold Afton, CN & CP Rail and Domtar. 

Kamloops has deeply unique and cultural and geographical diveristy "Kamloops" derived fromt he Schwepemec work, T'Kemlups directly translate to :the meeting of the waters", because of the North and South Thompson, right through the centre of the city through to Kamloops Lake. The Kamloops Indian Bank has deep roots within our community and offers tours of their histroical museum, as well as their grounds with a Keekwillie.They also offer a music and cultural festival yearly, where they celebrate and share their rich cullturally infused festivities. 

As far as nature activies, Kamoops is first class. Little and Big Shuswap are east of the city and can be accessed withing an hour or two, drive from the Kamloops downtown core. These lakes have alot to offer and are ideal places for boating, seadooing, waterskiing, wakeboarding, canoeing, kayaking and fishing alike. Among the lakes aforementioned, there are also many other smaller lake in Kamloops and area. We are incredibily lucky here to live in a vast valley, with a new hike or bike trail, around every corner. From the wind-sculpted hoodoos of Mara Canyon, to the breathtaking views atop Kenna Cartwright Park, the majestic waterfalls of Petersen Creek and everything in between, Kamloops proves itself many times over in outdoor activity opportunities. Sun Peaks Mountain Resort is just 45 minutes north of Kamloops, offering a works class range of ski and boarding trails. Harper Mountain is a mere 20 minutes from town and has much to offer, with a number of introductory trails, terrain park and tubing. There are eight golf courses in and around Kamloops, Tobiano Golf Course, Mt. Paul Golf Course, Kamloops Golf and Country Club, Rivershore Esate and Golf Links, Sun Rivers Golf and Resort Community, Sun Peals Golf Course and Driving Range, and Eagle Point Golf Resort. Experiencing even one of our greens, is a great way to see the varied topography and terrain, that we, as a city have to offer. 

Kamloops has many education options for elementary and senior high school students, among these are French Immersion, Science and Technology, School of the Arts, Montessori; Trades and Technology have been a welcome edition to our school system. Thompson Rivers Unviersity has top rate eductional opportunites, offering smaller class sizes and an impressive range of faculties. The campus is based in the Sahali area of town and is in waling distance to central areas and is easily accessible to public transit. The TRU campus is ever-growing and is an example of school where you can experience high level education in a gorgeous environment. 

Kamloops, which is just one stop along the Okanagan Valley, is know for our fertile soils, making planting and growing easy, shown by the long list of farms, ranches  and wineries in the surrounding areas. Our local wines can be bought currently through the liquor stores, wine and beer stores,  local Save-On Food store, as well as visiting the wineries. 

The downtown core is lively, fresh and inviting, contributing bounteous amounts of cafes, restaurants, markets and shops. A farmer's market is held twice a week April through to the end of October and moves inside for the the winter season. Also various arts and cultural festival throught the summer months. Kamloops is home to and microbreweries and you can drop by Red Beard Cafe and The Noble Pig, to try a new brew. 

Kamloops is a hub city with easy access to Vancouver, Kelowna, Revelstoke and Lake Country, quickly becoming a city easly comparable to that of major cities in BC, but with a friendly smaller town feel.