Deny Sullivan, Interest rates need to fall a lot to avoid mortgage renewal pain.
Deny Sullivan works in infrastructure investing, based in Halifax. He has a number of interesting analyses on his Substack, but one of the most alarming is shown above: it shows five-year mortgage rates, compared to the rates five years previously.
Pre-Covid, mortgage rates were low, and they got lower when Covid first hit. They’ve now risen sharply. If rates stay where they are, the gap will increase: people whose mortgages are renewing over the next couple years will face larger increases in interest rates than those renewing today.
The mortgage stress test ensured that people could handle interest rates that were 2% higher. But the gap could be more like 4%.
Mortgage rates could come down - but slowly
Ron Butler points out that long-term bond yields, which are closely connected to mortgage rates, have started to come down.
Bond Yields Drop So Will Mortgage Rates: Lower Fixed Rates Next Week
The old story about Mortgage Rates being Elevator going up: Stairs going down is true
The peak Fixed Rates we see today will fall more slowly than they rose
But expect 10 to 20 Bps of Rare reductions
Which won't change anyone's world or create sudden enthusiasm to run out & buy a house because rates are still way too high for that
But will belief that the Bank of Canada is finished hikes mean lower Fixed Rates eventually
Typically YES
Long-term bond yields (more than 10 years) are shown in red below: