1.4 million Canadian mortgages face higher costs as war-driven bond yields lift fixed rates
A war half a world away is quietly rewriting Canadian mortgage math, pushing up fixed rates, pressuring condo investors and shaking household sentiment all at once.
Three‑ and five‑year fixed mortgage rates jumped by about 0.5 percentage points in just three weeks last month as bond yields reacted to the conflict in the Middle East, according to CBC News, which cited Toronto mortgage broker Marshall Tully.
He said “unfortunately, it's possible that trend could continue.”
CBC News reported that 1.4m mortgages will renew by year‑end, representing about 23 percent of all loans, with many originated at much lower 2021 rates.
Tully said “many people are coming into their renewals totally blind and thinking that rates just keep coming down or holding,” even as costs rise.
Fixed‑rate mortgages have moved fastest because they are “backed by bond yields,” which fluctuate with global events, Tully told CBC News.
Some lenders held off on hikes when ceasefire talks seemed possible, but “moved forward with raising rates” after US President Donald Trump’s prime‑time address offered little clarity on how long the conflict might last.
As of April 2, the average five‑year fixed mortgage rate sat around 4.95 percent, up from closer to 4 percent only weeks earlier, with the three‑year fixed at 4.59 percent and the average variable rate at 4.2 percent.
The Bank of Canada’s key rate remains at 2.25 percent, set in October 2025 and unchanged since.
Before the war, markets expected further cuts this year. That outlook has shifted.
CIBC World Markets deputy chief economist Benjamin Tal told CBC News the war, Iran’s closure of the Strait of Hormuz and continued US tariffs are all feeding into higher fixed mortgage rates.
He argued that “the five-year fixed rate is already too high for this slow economy,” but said banks still raise rates to avoid being “caught short in future lending,” especially on longer terms.
Moshe Lander, a senior economics lecturer at Concordia University, told CBC News that March inflation is expected to rise after Iran effectively closed the Strait of Hormuz, “one of the world's most important maritime chokepoints.”
He said “the longer this lasts, the more uncertain American policy is,” and that this uncertainty will drive up Canadian prices and ultimately push the Bank of Canada to raise interest rates.
Lander said expectations now point to as many as three BoC hikes by year‑end and that Trump’s non‑committal speech “likely made the outlook worse,” forcing banks to “price in for uncertainty” so mortgage holders face an “uncertainty premium” in their rates.
Tal told CBC News that “if you are upset that the five-year fixed mortgage rate you were hoping to get just went up, you can blame Trump for that.”
In this setting, strategy matters.
Tully told CBC News that now is a good time to lock in, saying “the easiest thing you can do is get a rate hold — and many people don’t realize they have the ability to do that.”
He noted that borrowers who can switch banks often secure a 120‑day rate hold, with the rate falling if market rates drop, while same‑bank holds are usually closer to 30 days.
Tal advised trying to “buy yourself some time” before committing to a longer‑term mortgage, telling CBC News that “the Canadian economy is currently on the verge of 0 percent GDP growth, very close to a recession — this is not typically an environment where we would see rates go up.”
Lander told outlet that mortgage holders “need to protect themselves more than ever” and urged Canadians to “contact a financial planner; contact your bank.”
He said that if borrowers approach lenders early, “they will work with you to make sure you don’t have to fire-sell your home,” pointing to options such as extending amortisation, adjusting term length or possibly suspending interest.
Despite the pressure, CMHC said in a written statement to CBC News that Canadian homeowners have shown themselves to be “remarkably resilient” in the face of volatile borrowing costs.
