The conflict in the Middle East is exerting unexpected influence on Canadian mortgage costs. Recent reports indicate a notable 0.5 per cent surge in three- and five-year fixed mortgage rates within a mere three-week period, as confirmed by Marshall Tully, a mortgage broker based in Toronto. Tully expressed concern that this upward trend might persist.
The Canada Mortgage and Housing Corporation (CMHC) projects that approximately 1.4 million mortgages will undergo renewal by year-end, constituting about 23 per cent of all mortgages. A significant portion of these renewals had previously secured lower rates in 2021, leading to some individuals being caught off guard.
Fixed-rate mortgages have seen rapid escalation, primarily due to their ties to bond yields, which are susceptible to global events like conflicts. The recent address by U.S. President Donald Trump failed to provide substantial clarity on the conflict’s duration, prompting some lenders to proceed with rate hikes.
The Bank of Canada’s key interest rate has remained at 2.25 per cent since October 2025, despite earlier predictions of further cuts this year. The ongoing conflict and Iran’s actions in closing the Strait of Hormuz, alongside persistent U.S. tariffs, are contributing factors impacting fixed-rate mortgages in Canada.
Economic experts, including Benjamin Tal from CIBC World Markets, now anticipate multiple rate hikes by the Bank of Canada this year, reflecting the evolving economic landscape. These uncertainties are translating into an ‘uncertainty premium’ that mortgage holders are facing in the current market conditions.
Although the war’s resolution could lead to price stabilization in the oil and gas sectors, experts caution that inflationary pressures may persist for months. As mortgage holders navigate these challenges, advice varies on strategies, with suggestions ranging from locking in new rates to exploring extended rate-hold options for flexibility.
In light of the economic climate, seeking guidance from financial advisors or banks is recommended to explore viable solutions that align with individual circumstances. Despite the challenges posed by fluctuating rates, Canadian homeowners have demonstrated resilience in managing their mortgages effectively, as acknowledged by the CMHC.