Canadian government bond yields have risen to their highest since the financial crisis in recent days, and this rise could pose aLast week five-year bond yields rose to 4.4 per cent. As bond yields lead fixed mortgage rates, the increase implies that the lowest available five-year fixed rate could rise to 6.25 per cent, Brown said.
That’s a 150-basis point increase since April, which Brown says is equivalent to a hit to affordability of about 13 per cent.Rising mortgage rates will put more buyers on the sidelines, but even before the home price outlook had deteriorated more than Capital economists had expected.
Toronto-Dominion Bank economists also see a “more pronounced and extended downturn” for the housing market than they envisioned in June because of rising bond yields.They now see home sales and prices falling in the last quarter of this year and into 2024. By the first quarter of next year, they expect sales and prices will have declined by 8 per cent and 6 per cent, respectively, from where they were in the second quarter of 2023, said TD economist Rishi Sondhi.
Homebuyers might get some mortgage relief if Canadian bond yields start to edge down by the end of this year as the economy softens and market bets on“We suspect that it will take until 2025 for Canadian home sales to sustainably surpass their pre-pandemic level,” Sondhi said.Economists say the latest bumper crop of jobs probably isn’t enough in itself to tip the scales to another hike by the Bank of Canada, but it sure helped build the case.
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