The year 2024 began with a stronger-than-expected performance from the economy, prompting a watchful eye from the rate market for any signs of a potential resurgence in inflation.
The fluctuation in bond yields, often a precursor to changes in fixed mortgage rates, has been notable. Today, for instance, yields surged following positive U.S. economic indicators. While there’s no immediate concern for a sharp increase in fixed rates, attention is focused on Canada’s five-year yield, a guiding beacon for the mortgage market. It’s imperative for it to remain below approximately 3.85 per cent; otherwise, fixed rates might see a significant uptick.
Looking ahead, market sentiment has postponed expectations for the first Bank of Canada interest rate cut to around July, as indicated by forward rate data from CanDeal DNA. While such projections carry some uncertainty, it’s clear that significant rate relief is still a few months away.
In terms of mortgage rates, there’s been little movement in the lowest nationally available fixed and variable rates this week. Significant shifts are unlikely until economists’ anticipated improvement in inflation this spring or an unexpected development. Optimism leans towards the former scenario.