A surge in U.S. job growth has unexpectedly put a stop to the recent decline in mortgage rates across Canada. After weeks of falling rates, thanks to lower bond yields, the strong American labor market is now reversing the trend. This sudden shift in economic conditions has led to a rise in Canadian bond yields, which directly influence fixed mortgage rates. As a result, Canadian homeowners and buyers who were hoping for further relief on their mortgage payments may have to wait longer.
The connection between U.S. jobs and Canadian mortgage rates stems from how bond markets work. When the U.S. releases strong employment numbers, it signals that their economy is growing faster than expected. This often leads to higher bond yields because investors expect central banks to keep interest rates higher for longer to control inflation. In turn, Canadian bond yields tend to rise in response, driving up mortgage rates across the country.
Many Canadians were benefiting from falling fixed-rate mortgages in recent months, as bond yields dropped globally. However, with the U.S. job market booming, the bond market has reacted by pushing yields higher. This shift is putting pressure on Canadian banks to adjust their fixed mortgage rates upward, making it more expensive for those seeking to buy a home or renew their mortgage.
While some economists believe that mortgage rates could stabilize, others warn that further U.S. job market surprises could push rates even higher. For Canadians, this development is a reminder that global economic events can have a significant impact on their housing costs, even if those events originate outside of the country.
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