Middle East war driving mortgage rate increases in Canada

The ongoing conflict in the Middle East is already affecting Canadians in ways many did not anticipate, most notably through rising mortgage rates. According to mortgage broker Marshall Tully, three- and five-year fixed mortgage rates increased by roughly 0.5 per cent within three weeks, and the trend may continue.

The Canada Mortgage and Housing Corporation estimates that about 1.4 million mortgages, roughly 23 per cent of all Canadian mortgages, will be renewed by year’s end, many at rates far below current levels.

Fixed-rate mortgages, which are tied to bond yields, have reacted to global instability, including the ongoing war in Iran and the closure of the Strait of Hormuz. Tully noted that U.S. President Donald Trump’s recent address added little clarity on conflict duration, prompting some lenders to raise rates further.

Economic experts warn of an “uncertainty premium” baked into mortgage costs. Benjamin Tal said continued U.S. tariffs and energy price spikes are pushing rates higher, while Moshe Lander added that inflation is expected to rise as a result of increased costs for Canadian goods and services.

Recent figures show five-year fixed rates near 4.95 per cent, up from around four per cent just weeks ago, with three-year rates close behind at 4.59 per cent. Variable rates remain lower at approximately 4.2 per cent.

Experts advise Canadians approaching mortgage renewal to consider locking in a rate now. Many lenders provide 30- to 120-day rate holds, allowing homeowners to protect themselves against further increases. Other options include adjusting amortization periods or negotiating term lengths.

Despite the challenging environment, the CMHC notes that Canadian homeowners have been “remarkably resilient” in adapting to fluctuating rates. With careful planning and early consultation with banks or financial advisors, homeowners can manage mortgage costs even amid global uncertainty.

Courtesy: CBC