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With a major decrease in Canadian bond yields to 0.52 as of March 27, 2015. The plummet in bond yields is in part due to the surprise rate cut at the Bank of Canada's meeting in January. In spite of that, posted mortgage rates have moved slightly lower and banks passed through only a partial amount of the 25 basis point rate cut to prime rates that govern variable mortgages. The forecasts for future rate decisions have seen fluctuation. The five-year bond yield hit a record low of 0.59% but has since rebounded. The five-year fixed mortgage rate is currently at 4.74% which may be the absolute floor. The 0.75% decline in the five-year bond yield translated to only a 0.04% reduction in the qualifying rate.

It may be a while before mortgage rates move substantially higher. The mortgage rate forecast for 2015 and 2016 are shown below. Projections show that mortgage rates will continue to stay at historic lows for the remainder of the year. As the Canadian economy rebounds from the decline in oil prices and if the US Federal Reserve begins to tighten in the summer months, we may see some upward pressure on long-term interest rates in the last quarter of this year and into 2016.


Source: Bank of Canada, BCREA Economics