Donald Leka

By Mid-Q3 2026, Canada's 5-yr government bond yield reached the low-3% range, helping keep fixed mortgage rates elevated despite expectations from softer growth.
An expert linked the pressure mainly to inflation worries after oil prices rose, since bond investors demand better returns when future purchasing power looks weaker.
In Mid-Q3, Canada's 1-yr government yield hovered near high-2%, while the 5-yr sat >60 basis points higher, reflecting added compensation for longer-term risks.
The explanation also centered on heavy government borrowing and competition for investor capital, including corporate debt, which can force issuers to offer higher yields.
An expert said lower inflation, fewer expectations for rate hikes, and easing trade uncertainty could pull yields lower, though key drivers sit outside Canada's control.

Canada Bond Yields Stay Elevated

In Canada, many mortgages renew every few years, so changing rates can reach households faster, making term selection a key part of financial resilience.
Since 2022, borrowers increasingly chose variable-rate loans and shorter fixed terms, especially uninsured borrowers, because shorter terms offered more favorable rates currently.
Canada's system leaves households carrying much of interest-rate risk: costs can jump when rates rise, but borrowers can also benefit faster when rates fall.
A housing agency survey found renewed borrowers reported financial pressure from rate changes at 35%, while 25% regretted some features of their mortgage choice.
As uncertainty persists, mortgage terms matter beyond upfront cost, shaping household stability for years and determining how future rate risk is shared across Canada.