Mortgage Market Update: What’s Driving Rates This Week

Even though recent economic data out of Canada and the U.S. continues to show softness, mortgage funding costs moved higher to start the week. What’s important to understand is that these rate movements weren’t caused by Canadian fundamentals, but by global bond markets.

Here’s a breakdown of what’s happening, why it matters, and how it may impact your mortgage strategy.

Why Mortgage Rates Jumped

The key driver of this week’s rate increase came from overseas.The Bank of Japan suggested it may raise rates in December, which sparked a global bond sell-off. As investors reacted, Japan’s 10-year bond yield surged to its highest level since 2006. That shift pushed bond yields higher worldwide—including in Canada.

Higher bond yields directly increase the cost of fixed-rate mortgage funding.

Domestic Data Isn’t the Issue This Week

Here at home (and south of the border), economic data isn’t pointing to strength:

• Manufacturing in both Canada and the U.S. remains in contraction.

• Under typical conditions, this would place downward pressure on rates.

• Instead, global capital flows outweighed local weakness, pulling rates higher despite softer data.

In short: this wasn’t a made-in-Canada move.

Key Yield Movements

These yield increases are placing upward pressure on fixed mortgage rates:

• Canada 5-year bond: +9 bps

• 5-year Canada Mortgage Bond: +8 bps

• 10-year Canada Mortgage Bond: +14 bps

• 4-year swap: +6 bps (a 3-month high)

These are meaningful moves—and they help explain the recent rate adjustments you may have noticed.

Looking Ahead to December 10

Two major central bank decisions are approaching:

• Bank of Canada: 92% probability of no change

• U.S. Federal Reserve: 92% probability of a 25 bp cut

This divergence continues to shape market expectations. Canada is expected to hold steady, while the U.S. may take another step toward easing. These opposite paths affect global capital flows, yield curves, and overall borrowing costs.

How This Impacts Mortgage Strategy

Fixed Rates

With the current pricing environment and a steepening yield curve, the decision between a 3-year and 5-year fixed remains very close. The right choice depends on your goals, timeline, and renewal strategy.

Variable Rates

• Discounts on variable rates remain historically weak

• Some improvement is expected later in 2026

• Markets are now pricing in the bottom of the overnight rate cycle, meaning:We’re closer to the floor than the ceiling

If you're in a variable rate or considering one, this context matters for long-term planning.

Inflation Risk to Watch in 2026

Beginning in April 2026, inflation will no longer benefit from the downward effect of the consumer carbon tax removal. Without this offset, inflation could move higher again—potentially delaying future rate cuts.

This is an early but important factor for anyone planning long-term mortgage strategy.

Bottom Line

• This week’s rate increases were driven by global, not Canadian, fundamentals

• No Bank of Canada rate cut is expected on December 10

• The 3- vs. 5-year fixed comparison remains the most important discussion for both buyers and renewers right now

As always questions are welcome - reminder - market news is good to know but terms should be picked based on your family needs and goals. It's so important to remember the market does not care about you. It is not going to check in with you - but I will - send me a note if you would like to discuss mortgage options, projections and what is next for you and your home ownership goals.