Will We Continue to Enjoy Historically Low Fixed Rates?

5 Year Bond Yields vs. Economy

In times of economic uncertainty, bond prices increase as people gravitate towards more secure investments.
Inflated bond prices = decreased bond yields
This is exactly what happened in March of 2020. As lockdown severely depressed the Canadian economy, the 5-year bond yields plummeted to historical lows.

Covid-19 Vaccine on the Horizon

Pfizer announced on Nov. 9th that their Covid-19 vaccine proved to be more than 90% effective in clinical trials.
With this news, 5-year bond yields have crept back up to hover around 0.5% after decreasing to as low as 0.32% in July, 2020.
As people see the light at the end up the Covid tunnel, more people are selling their bonds and investing in the open market, driving bond prices down, and bond yields up.

Good News = Bad News for Borrowers?

Fixed mortgage rates, specifically the 5 year fixed rates, closely follow the trend of the 5 year bond yields.
Due to this direct correlation, experts predict that there is a possibility that fixed mortgage rates could go up.

5 Year Canadian Bond Yield

Low rates means that lender's profits are tight, and increasing bond rates mean that profits will get tighter.
There's a likelihood that mortgage rates could go up as bond yields increase.
However, not all experts are in agreement seeing as the economy is still very depressed and can't afford higher rates. Many believe even if fixed rates do go up, it will only be temporarily.
The variable rate, which is based on the overnight lending rate by the Bank of Canada, will likely stay low until inflation reaches 2%.

*The information above was taken from Canadian Mortgage Trends and CBC News