If you’ve been keeping an eye on the real estate scene lately, especially in places like Surrey, BC, you might have noticed something unsettling: fixed mortgage rates are creeping back above 4%. Just when it seemed like rates were finally cooling off, they’ve rebounded and experts are now signalling that this may not be a temporary blip.
This renewed upward trend in fixed rates affects homeowners and prospective buyers alike, particularly those exploring a mortgage in Surrey BC, where the real estate market remains active. But why are rates rising again, and what global forces are at play behind the scenes?
Let’s break it down.
At first glance, many assume Canadian mortgage rates are tied directly to domestic interest rate policy or the Bank of Canada’s decisions. But that’s only part of the equation.
Five-year fixed mortgage rates in Canada are heavily influenced by the country’s five-year bond yields. These, in turn, closely follow the U.S. 10-year Treasury yields. Yes, you read that right: what’s happening in Washington can move the needle on your mortgage in Surrey BC.
In April, the U.S. 10-year Treasury yield briefly dipped below 4%. This drop pulled Canadian bond yields down as well with the five-year yield reaching a low near 2.50%. But since then, both have reversed course. Today, the U.S. 10-year yield is above 4.5%, and Canada’s five-year bond yield has climbed back up to approximately 2.85%.
As these yields rise, so do fixed mortgage rates. It’s no coincidence that major Canadian banks such as CIBC, RBC, and TD have all recently bumped up their five-year fixed mortgage offerings by 10–15 basis points.
So, what exactly is happening south of the border that’s pushing yields higher? The answer lies in a mix of investor confidence, inflation expectations, and broader economic uncertainty.
According to Bruno Valko, VP of National Sales at RMG, the performance of the U.S. economy and investor expectations around it plays a central role. Indicators like inflation, employment, and even speculation around interest rates affect bond markets.
For instance, earlier this month, inflation data out of the U.S. hinted at potential rate cuts by the Federal Reserve later in the year. Surprisingly, this caused Treasury yields to rise not fall due to fears of stagflation (a rare combo of high inflation, slow growth, and high unemployment).
Stagflation isn’t the only concern. Tariff policies, unpredictable fiscal decisions, and waning demand from international buyers especially countries like China are also contributing to volatility in the bond markets.
And when foreign buyers scale back on U.S. Treasuries, yields have to rise to attract new investors. This, as Valko notes, creates a domino effect that ends with higher mortgage costs including for anyone seeking a mortgage in Surrey BC.
Another technical, yet crucial, factor driving yields higher is the massive refinancing challenge facing the U.S. government. Roughly $7 trillion worth of Treasuries are maturing this year.
To refinance that debt, the U.S. Treasury needs to reissue new bonds a huge volume of supply that could flood the market. If demand doesn’t match that volume, bond prices drop and yields surge.
This added pressure only compounds the rate increase facing borrowers in Canada especially those opting for long-term fixed mortgages.
All of this raises an important question: what should homeowners and buyers in Surrey do in the face of climbing rates?
The answer depends on your tolerance for risk and your financial goals. Valko suggests that those who are more risk-averse may benefit from locking in a five-year fixed mortgage rate now, while rates are still somewhat manageable. The stability of predictable payments can be appealing, especially in a climate full of unknowns.
However, others argue that it might be worth riding out the current wave of uncertainty in hopes of future rate cuts.
Ron Butler of Butler Mortgage believes that variable rates could start coming down later this year. He forecasts the possibility of fixed rates eventually falling back into the 3% range before year’s end. For borrowers exploring options for a mortgage in Surrey BC, this presents an opportunity to start with a variable rate and switch to fixed later when (and if) rates drop again.
The next few weeks could bring more clarity. A key inflation report due next Tuesday in Canada will be closely watched. For those seeking a mortgage in Surrey, this data is especially important—if it suggests inflation is being pushed higher by retaliatory tariffs or other supply shocks, it may influence the Bank of Canada’s approach to rate cuts.
Sal Guatieri, Senior Economist at BMO Capital Markets, doesn’t expect inflation to rise significantly in the near term. He predicts that inflation will remain close to the Bank of Canada’s 2% target which could pave the way for interest rate cuts, possibly starting in June. BMO expects up to three rate cuts by the end of the year.
This forecast bodes well for variable-rate mortgage holders, including those exploring a mortgage in Surrey. However, the road between now and June is full of economic data releases and shifting investor sentiment. No move is risk-free.
Interestingly, while most banks are hiking rates, Scotiabank is breaking from the pack. The lender has reduced some of its posted special and eHome digital mortgage rates, including a 90-basis point drop in its 1-year offering and a 60-basis point reduction on its 2-year rate. This is encouraging news for anyone considering a mortgage in Surrey, especially those looking for short-term flexibility in today’s changing market.
This could be a strategic move to attract short-term borrowers those waiting to refinance once rates (hopefully) fall later this year.
For those considering a mortgage in Surrey BC, the decision to wait or act now can be a tough one. Fixed rates are rising, and uncertainty in the bond markets could keep them elevated. On the other hand, signs are emerging that variable rates could become more attractive by mid-to-late 2025.
Here are a few practical takeaways:
The global economy is sending ripples through the Canadian mortgage landscape, and borrowers in Surrey, BC, are not immune. Rising fixed mortgage rates may be frustrating, but they’re rooted in deeper global trends from U.S. Treasury dynamics to inflation fears and foreign investment flows.
If you’re exploring your options for a mortgage in Surrey BC, now is the time to stay informed, understand your options, and make decisions aligned with your financial comfort zone.
No one can predict with certainty what the markets will do next but being prepared can help you navigate whatever comes your way. mortgage in Surrey | mortgage in Surrey | mortgage in Surrey
