Recent Rate Hikes Due to Success of Canada’s Bond Market

Bank of Canada data show five year fixed mortgage rates were the near the lowest in more than 50 years last week. Mid week, however, Canadian banks including National Bank of Canada, Laurentian Bank of Canada, CIBC and TD Canada Trust, announced a quarter-percentage point increase in their five-year fixed rates.

The increase was due to the recent overwhelming success of bonds sold by the Canada Housing Trust, the financing arm of CMHC. Canada’s bond market is “ benefiting from international confidence in the country’s economy and investors’ reluctance to seek refuge in U.S. bonds — as they did in May — because of skepticism about the U.S. Federal Reserve’s monetary easing program that makes U.S. Treasuries less attractive”, said Carlos Leitao, chief economist at Laurentian Bank Securities in an article on the Bloomberg website.

The article notes that Canadian homebuyers are benefiting from concern that European governments can’t finance budget gaps.

“It’s a little different than last spring in the sense that the U.S. Treasury is not receiving all of these safe-haven bids,” Leitao told Bloomberg. Now, as Europe struggles with its finances, “the winners appear to be Canadian.”

Some experts believe that recent rate hikes are a temporary phenomenon and are calling them a knee jerk response to the bond hype and that rates will drop back again before they continue an upward climb.

As of today, First Foundation’s best 5 year fixed rate is still an outstanding 3.49%.


As the company’s first employee, Jennifer has been a Licensed Mortgage Associate since 2004, but her current role is not focused on mortgages. She is the resident blog writer and…

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