Why Fixed Rates Are Rising,
And What It Means For Your Renewal

Bond yields have been climbing lately with everything going on globally, and fixed mortgage rates are following them up. If you have a renewal coming in the next few months, or even later this year, it's worth understanding why, and what you can actually do about it.

Why Fixed Rates Move With Bond Yields

Fixed mortgage rates aren't set directly by the Bank of Canada. They're priced off Government of Canada bond yields, mainly the 5-year bond, because that's roughly how long a typical fixed mortgage term runs and it's what lenders use to fund it. When bond yields rise, the cost of funding a fixed-rate mortgage rises too, and lenders pass that along. When yields fall, fixed rates tend to follow back down.

That's different from variable rates, which track the Bank of Canada's overnight rate and move only when the Bank makes an announcement. Right now, bond yields are the ones doing the moving, which is why fixed rates have been drifting up even without a Bank of Canada rate hike behind it.

What a Rate Hold Actually Protects

A rate hold locks in today's rate for up to 120 days while you review your options. If rates move higher between now and your renewal date, you're already protected, you get the held rate, not the higher one. If rates happen to move lower instead, you're not locked out of the better rate either.

It costs nothing to set up, and it's the single easiest way to take the pressure off a renewal that's still a few months away. There's no reason to wait for the letter from your current lender to show up before you start looking.

Fixed or Variable, Which Makes Sense for a Renewal Right Now

There's no universal answer, it depends on your full picture. Fixed gives you payment certainty for the term, no surprises if rates keep climbing. Variable carries more risk but can mean real savings, especially with the current gap being what it is, and it typically comes with a lower penalty if your plans change and you need to break the mortgage early.

The right structure depends on your income, your other debts, how long you plan to stay in the property, and how much rate movement you're comfortable with. That's exactly the kind of thing worth reviewing together rather than guessing at.

If Your Renewal Is Coming Up

1. Don't wait for the renewal letter. If your renewal is anywhere in the next 120 days, or later this year, it's worth a look now while rates can still be held.
2. Set up a rate hold. It protects you from further increases while you compare options, at no cost and no obligation.
3. Get the fixed-vs-variable comparison for your actual file. The gap we're seeing in the pipeline right now won't apply the same way to every situation, it depends on your numbers.
4. Compare before renewing with your current lender by default. Your current lender's renewal offer is rarely their best offer, a second set of eyes across other lenders is worth the five minutes.

Have a renewal coming up in the next few months? Reply or reach out and we'll take a look together, no pressure, no assumptions.