Growing skepticism on interest rate cuts has mortgage market on edge

financialpost.com:

The rate market is on edge, pending Friday’s pivotal employment reports north and south of the border. Bondholders are hungry for signs of a moderating economy. And if the job numbers flex too much muscle, expect traders to pump up bond yields, with mortgage rates feeling the burn.

In fact, we’re at a point now where the market is becoming dangerously skeptical of 2024 rate-cut expectations. North America’s economy keeps rebounding despite economists predicting a slowdown. That’s raising hair on bond traders’ necks, as an inflation comeback is their worst nightmare. 

All of this is a problem for mortgage shoppers wanting lower rates, given that yields lead mortgage pricing.

Meanwhile, the lowest nationally-advertised uninsured variable rate jumped 14 basis points this week. But that’s only because HSBC Canada disappeared, having been devoured by banking titan RBC.

Apart from that and the uninsured 10-year fixed creeping up five bps, the leading national rates held their ground. 

Three-year mortgages are still a hot ticket as borrowers dodge the long-term commitment of a five-year fixed. The expectation of Bank of Canada rate cuts continues to dominate borrowers’ thinking.

Robert McLister is a mortgage strategist, interest rate analyst and editor of MortgageLogic.news . You can follow him on X at @RobMcLister .