U.S. jobs bonanza slams the brakes on falling mortgage rates in Canada
Just when experts thought the U.S. economy was ready for a lullaby, it wakes up like a fire alarm at 3 a.m.
We saw it Friday morning as the U.S. added an estimated 254,000 jobs in September. That’s over 100,000 more than predicted, and despite the inevitable revisions, it’s not what you would expect in an economy needing sizable monetary support. Many mainstream economists are no doubt rethinking their forecasts for 175-plus basis points of interest rate cuts through 2025.
This matters for Canadian mortgage rates, given the link between five-year U.S. bond yields (which are surging) and five-year Canadian yields — a common leading indicator of fixed mortgage rates. For the statisticians in the house, there’s a 0.97 monthly correlation between the two — i.e., they move together like synchronized swimmers.
That relationship is primarily why Canadian five-year yields have spiked 26 basis points in three days. The move is sounding alarm bells at mortgage lenders as it puts profit-margin pressure on the most heavily discounted fixed mortgage rates. Rock-bottom insured rates are especially vulnerable because that’s where margins are tightest.
Translation: if you need a fixed mortgage in the next four to five months, speed dial a broker or lender for a rate hold.
None of this necessarily means that rates won’t revert lower in the months ahead but it underscores how rates can take significant unexpected turns. A quarter-point rate hike exactly when you need a mortgage tacks on an extra $1,200 of interest for every $100,000 borrowed over five years.
So yeah, securing a rate guarantee is always a good idea — despite all the rate-cut talk.
The rates displayed below are updated by the end of each day and are sourced from the
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