Canada’s 5-Year Bond Yield Climbs to 3.75% — What This Means for Your Mortgage Rate

In early August 2025, Canada’s 5-year government bond yield ticked up to 3.75%, its highest level since April. While the number might sound technical, it carries big consequences for homebuyers and homeowners — especially if you’re looking at a fixed-rate mortgage or coming up for renewal soon.

Let’s break down what this means for your wallet, and why the bond market may matter more than the Bank of Canada (BoC) right now.

What Is the 5-Year Bond Yield — and Why Does It Matter?

The 5-year bond yield is a benchmark interest rate set by financial markets, not the central bank. It reflects what investors expect to happen with inflation, economic growth, and BoC policy over the next five years.

Lenders use it to price fixed-rate mortgages. So, when the bond yield rises, fixed mortgage rates often follow — even if the BoC hasn’t changed its overnight rate.

That’s why even a 0.10% move in the bond yield can affect your borrowing costs.

Why Did the Bond Yield Go Up This Week?

This recent rise in yields is being attributed to several factors:

• Sticky U.S. inflation data, which spooked global bond markets
• Strong Canadian job numbers, suggesting the economy isn’t cooling fast enough
• A weaker Canadian dollar, which could fuel import-led inflation
• Market uncertainty about when the BoC will cut again

Put simply, investors are pricing in fewer or slower rate cuts — and the bond market is reacting.

How This Affects Your Mortgage

If you’re shopping for a 5-year fixed-rate mortgage, expect rates to rise slightly (or hold steady at elevated levels). Lenders usually respond quickly when bond yields jump, and slower when they fall.

If you’re considering locking in a rate, now might be the time to speak to your broker — especially if you’re within the 120-day rate hold window.

And if your renewal is due in 2025, you may want to prepare for a rate that’s 2% to 3% higher than your current term, depending on when you last locked in.

Variable Rates Still Unchanged (For Now)

The bond market doesn’t directly affect variable-rate mortgages — those follow the BoC’s overnight rate. But bond movements do influence expectations for when rate cuts might happen.

If bond yields are rising, it likely means fewer cuts are expected in the near term, which isn’t great news for those hoping for lower variable rates before the end of the year.

What You Can Do Right Now

• Get pre-approved and lock your rate if you’re buying this fall.
• Talk to a mortgage broker if your renewal is within 6 months — they can hold a lower rate before it climbs.
• Consider a hybrid mortgage, which gives you partial protection from volatility.

Final Word from Mortgage.Expert

The 5-year bond yield is like a silent signal — it doesn’t make headlines the way BoC decisions do, but it’s just as important in shaping your mortgage rate.

With markets turning cautious again, now’s the time to stay proactive, not passive. Talk to an expert, lock in smart, and monitor the data closely. One smart decision today can save you thousands in the years ahead.