Interest Rates and Mortgages (1 Year Later)


We think rates will continue to go higher. Locking in your mortgage rate may be more expensive now, but not likely in 3-5 years.

A little over a year ago we blogged and reached out to our clients to lock in mortgages.  Since that time, the Bank of Canada overnight lending rate has moved from 50bps to 1.5% a move up of 200%!  We are constantly encountering people asking what to do now, with rates increasing.

5-year Bank of Canada lending rate up 200% since July 2017:

Source: Bloomberg

A 200% move over one year is likely the largest percentage move of all time, but it is still not close to “back- to-normal”.  If we go back to a normal environment we are looking at a further move of at least 100% higher.

Source: Bloomberg

For many years, the curve gravitated from 2% to 6%, with an average level of 2.87% over nearly 30 years.  We think there is a likely scenario that over time we will gravitate back into that range from our current 1.5%.

Source: Bloomberg

Ultimately the yield on bonds remains un-investable to us. The central banks in North America are currently hiking interest rates. However, in Europe and Japan, central banks are not only holding interest rates at zero, but are also buying bonds to force yields lower.  When this ends, we think we will see a much larger move higher in both bonds and interest rates.

Source: Bloomberg

Over time interest on US Government Ten Year Bonds has spent more time in the 4-7% range than under or over, we think there is a likely scenario they go back into that range.


Feel free to reach out at 647.484.3111 to chat.


Chris Stuchberry