{"id":25972,"date":"2025-06-16T11:11:18","date_gmt":"2025-06-16T18:11:18","guid":{"rendered":"https:\/\/www.roryc.ca\/blog\/?p=25972"},"modified":"2025-06-16T08:37:14","modified_gmt":"2025-06-16T15:37:14","slug":"will-the-next-6-months-see-a-change-in-canadas-economy-interest-rates","status":"publish","type":"post","link":"https:\/\/www.roryc.ca\/blog\/2025\/06\/will-the-next-6-months-see-a-change-in-canadas-economy-interest-rates\/","title":{"rendered":"Will The Next 6-Months See A Change in Canada&#8217;s Economy &#038; Interest Rates?"},"content":{"rendered":"<p style=\"text-align: justify;\">A chaotic first six months of the year for Canada\u2019s economy is drawing to a close \u2013 a period that\u2019s been marked by annexation threats from Donald Trump, the launch of a punishing global trade war by the US government, and a change in leadership in Ottawa under new prime minister Mark Carney.<\/p>\n<p style=\"text-align: justify;\">That political turmoil has roiled financial markets and raised fears of massive job losses and a sharp contraction for the national economy amid massive US tariffs on imports from Canada.<\/p>\n<p style=\"text-align: justify;\">It\u2019s also sent interest rates on a rollercoaster ride, with five-year Government of Canada bond yields \u2013 a key influencer of fixed mortgage rates \u2013 seeing a series of rapid spikes and dives throughout the year to date.<\/p>\n<p style=\"text-align: justify;\"><strong>Where are Fixed Rates Headed for The Rest of The Year?<\/strong><\/p>\n<p style=\"text-align: justify;\">That five-year yield is the \u201csweet spot\u201d in determining where fixed mortgage rates are headed in Canada, Dominion Lending Centres (DLC) chief economist Sherry Cooper (pictured top) told Canadian Mortgage Professional \u2013 but they could be less prone to big jumps in the next six months than longer-term rates.<\/p>\n<p style=\"text-align: justify;\">That\u2019s because federal budgetary strains in both Canada and the US are likely to impact longer views of the market more than short- and immediate-term rates.<\/p>\n<p style=\"text-align: justify;\">\u201cThe US is running enormous federal government deficits and, as a result, we\u2019ve seen a steepening yield curve in the US as 30-year yields have risen and short-term interest rates have edged downward,\u201d Cooper said.<\/p>\n<p style=\"text-align: justify;\">\u201cIn Canada, we\u2019re not going to have a budget this year, but certainly given all the potential projects that could be approved to improve Canadian domestic economic activity and also to create new trading partners, our budget deficits could increase as well \u2013 which means longer-term interest rates rise, even if shorter interest rates come down.\u201d<\/p>\n<p style=\"text-align: justify;\">The five-year yield has whipsawed from a high of nearly 3.28% on January 13 to a current level of about 2.93% at time of writing, although it\u2019s experienced a noteworthy uptick since the beginning of April and the launch of Trump\u2019s so-called \u201cLiberation Day\u201d global tariff war.<\/p>\n<p style=\"text-align: justify;\"><strong>All Eyes on The Bank of Canada as It Weighs Up A Return to Rate Cuts<\/strong><\/p>\n<p style=\"text-align: justify;\">Trade tensions and economic storm clouds have seen lenders assume an increasingly cautious outlook on the mortgage market, tightening their lending appetite in the first half of the year and in some cases adopting a stricter approach to certain borrower types.<\/p>\n<p style=\"text-align: justify;\">But while the Bank of Canada, whose benchmark rate leads variable mortgage rates, has held rates steady in each of its last two announcements, most observers expect it\u2019ll be back in cutting mode before long amid growing signs of a sluggish economy.<\/p>\n<p style=\"text-align: justify;\">The central bank tapped the brakes on a series of seven straight rate cuts in April and left its overnight rate unchanged last week, but acknowledged it was operating in an environment of extreme uncertainty and volatility as a result of US trade policy.<\/p>\n<p style=\"text-align: justify;\">Bank of Montreal (BMO) and National Bank both see the central bank\u2019s overnight rate hitting 2% by the end of the fourth quarter, with Canadian Imperial Bank of Commerce (CIBC), Royal Bank of Canada (RBC) and TD Bank all expecting that rate to slide to 2.25%. Among the Big Six lenders, only Scotiabank forecasts no change in the Bank\u2019s key rate by the end of the year.<\/p>\n<p style=\"text-align: justify;\">Cooper also views more rate cuts by the Bank this year as a likely prospect, a move that would be beneficial for both variable and fixed mortgages (the latter because of likely downward pressure on bond yields).<\/p>\n<p style=\"text-align: justify;\">\u201cFixed mortgage rates have been inching upwards as banks are less accommodating and lenders in general are less accommodating because of increased risk,\u201d Cooper said. \u201cSo I don\u2019t think that five-year yields are going to rise as much as 30-year yields, but Canada\u2019s economy is extremely interest-rate sensitive, much more sensitive to interest rates than the US because we don\u2019t have these 30-year fixed-rate mortgages.<\/p>\n<p style=\"text-align: justify;\">\u201cAnd as a result, I think our economy will flow and that the Bank of Canada will take short-term interest rates down, even though the budget deficits could keep upward pressure on longer-term interest rates.\u201d<\/p>\n<p><a href=\"https:\/\/www.mpamag.com\/ca\/mortgage-industry\/industry-trends\/canada-mortgage-market-faces-uncertain-rate-outlook\/538868\" target=\"_blank\" rel=\"noopener\">Canada Mortgage Market Faces Uncertain Rate Outlook<\/a> by Fergal McAlinden | CMP<\/p>\n","protected":false},"excerpt":{"rendered":"<p>A chaotic first six months of the year for Canada\u2019s economy is drawing to a close \u2013 a period that\u2019s been marked by annexation threats from Donald Trump, the launch &hellip; [<a href=\"https:\/\/www.roryc.ca\/blog\/2025\/06\/will-the-next-6-months-see-a-change-in-canadas-economy-interest-rates\/\">read more<\/a>]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9,13],"tags":[],"class_list":["post-25972","post","type-post","status-publish","format-standard","hentry","category-mortgage","category-real-estate"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.5 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Will The Next 6-Months See A Change in Canada&#039;s Economy &amp; Interest Rates? 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