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2 Jul

Canada’s Economy Rebounds—Will Mortgage Rates Stay Higher?

General

Posted by: Cedric Pelletier


Canada’s economy grew 0.5% in April, beating expectations and marking its strongest monthly gain since last summer. While that’s positive news for the economy, it may also keep pressure on fixed mortgage rates.

Key Takeaways

  • Canada’s GDP rose 0.5% in April, above forecasts.
  • Growth was led by oil and gas, mining, and construction.
  • The 5-year Government of Canada bond yield climbed back above 3%.
  • Strong U.S. job openings also pushed bond yields higher.
  • Markets now see a roughly 50/50 chance of another Bank of Canada rate hike by year-end.

Why It Matters

Fixed mortgage rates are largely driven by Government of Canada bond yields. As stronger economic data pushes yields higher, lenders have less room to lower fixed mortgage rates.

While Canada’s economy is showing resilience, challenges remain, including trade uncertainty, tariffs, and slower population growth. Even so, stronger-than-expected GDP has reinforced expectations that interest rates could stay higher for longer.

What Homebuyers Should Know

If you’re shopping for a mortgage or renewing this year, don’t expect fixed rates to fall quickly unless bond yields move lower. Economic data over the coming months—especially inflation and employment—will continue to shape where rates go next.

FAQ

Why did bond yields rise?
Stronger Canadian GDP and better-than-expected U.S. job openings increased expectations that interest rates could remain elevated.

Does this mean mortgage rates will rise?
Not necessarily, but higher bond yields typically reduce the likelihood of lower fixed mortgage rates in the near term.


Cedric Pelletier – Mortgage Associate
Maximal Mortgages