September Fixed Mortgage Rates To Remain Steep As Bond Yields Climb

An autumn crispness may be creeping into the air but there’s no cool down anticipated for bond yields, the main driver of fixed mortgage rates.

The new highs hit during the month of August are anticipated to continue throughout September as investors react to a potential withdrawal of U.S. economic stimulus. This will prompt lenders to respond with a hike to their fixed rate offerings.

Variable rates, however, are to remain unchanged as Canadian economic growth remains below the benchmarks required to raise interest rates.

Fixed Mortgage Rates: Up: Global bond investors continue to react negatively to the possibility of a quantitative easing scale back in the U.S. This has impacted Canadian bond yields in turn, which hit new highs in the month of August, and are not anticipated to moderate in the short term. This will prompt lenders to increase the price of their fixed mortgage rates.

Variable Mortgage Rates: Unchanged: Canadian economic growth remains slow, and inflation is not expected to hit the two per cent growth benchmark until 2014.

It is not anticipated that the Bank of Canada will manipulate the current Overnight Lending Rate from one per cent, where it has remained since September 2010, and variable mortgage rates will remain where they are for the time being.