C.D. Howe: higher bond yields to lift mortgage renewals

Canadians renewing mortgages taken out in 2020 and 2021 face sharply higher payments because the five-year Government of Canada bond yield, which anchors fixed mortgage rates, has climbed to 3.7 per cent from less than one per cent, the C.D. Howe Institute said in an Oct. 5 analysis.

The think tank said the yield figure was current as of Sept. 30. It said renewing households will see “higher payments,” raising concerns about household finances, even though the Bank of Canada has not moved its policy rate.

The Bank of Canada has left its overnight rate unchanged for close to a year, and economists expect another hold at its Oct. 28 decision. The institute said that does not shield borrowers, because Canadian and U.S. bond markets are closely integrated and rising American yields tighten conditions in Canada.

The bond market move has been broad. Canadian Mortgage Professional, which reported on the analysis on Oct. 7, said the 10-year Government of Canada yield rose to 3.99 per cent from 3.45 per cent since early July, while the two-year yield rose to 3.37 per cent from 2.76 per cent.

U.S. yields have risen faster. The publication said the U.S. 10-year Treasury yield climbed to 5.3 per cent from 4.5 per cent over the same period.

Inflation is part of the backdrop. Canada’s annual inflation rate was 3.0 per cent in August, up from 2.8 per cent in June, the publication reported.

Ratehub.ca listed the lowest insured five-year fixed mortgage rate at 4.34 per cent as of Oct. 7, according to the same report. Many homeowners now renewing locked in their rates when the five-year bond yield was below one per cent and fixed mortgage rates were far lower.

The publication also cited a Bank of Canada staff note estimating that about one-third of mortgage holders will face higher monthly payments by the end of 2026, and that 10 per cent of variable-rate renewers could see increases above 40 per cent. Those projections were not part of the C.D. Howe analysis, it said.

Two mortgage brokers were quoted in the report. Max Singh of TMG The Mortgage Group said renewal rates are rising faster than current pricing suggests. Taz Zaide of 6ix Mortgage Group said clients up for renewal have generally had no trouble qualifying.

Credit data points the same way. Equifax Canada figures cited by the publication showed delinquency balances up 32 per cent nationally in the first quarter of 2026 from a year earlier, and up 52 per cent in Ontario.

The renewal pressure arrives as housing demand is already soft. Resale activity fell 2.3 per cent in September, according to the Canadian Real Estate Association.

The bond-yield figures in this report come from the C.D. Howe Institute and from Canadian Mortgage Professional’s reporting of it, and rate quotes change daily. Borrowers approaching renewal should confirm current offers with their lender or broker.

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