Canada’s 5-Year Bond Yield Drops Below 3.80% — Will Fixed Mortgage Rates Follow?

What’s Happening?

As of this week, Canada’s 5-year government bond yield has fallen below the 3.80% mark for the first time since April — sparking fresh speculation about whether fixed mortgage rates might finally ease.

The 5-year bond yield is considered a key indicator for fixed-rate mortgages in Canada, especially the popular 5-year fixed term used by most borrowers.

Why This Matters for Borrowers

Lenders use bond yields to price fixed mortgage rates. When yields go down, banks’ funding costs decrease — and there’s more room to reduce fixed mortgage rates.

But that doesn’t mean they’ll drop overnight.

Many lenders are still waiting for:

• Inflation data clarity
• A formal Bank of Canada rate cut
• More stability in global markets (particularly around tariffs and bond volatility)

Expert Quote

“If the 5-year yield holds below 3.80% for more than a few sessions, we may start to see 5-year fixed rates dip toward the 5.50% range again,” says mortgage strategist Julian Lamont.

What Should You Do?

• If you’re renewing: Ask your broker to track lender specials. We may see selective fixed-rate discounts in the next few weeks.
• If you’re buying: Fixed rates haven’t dropped yet, but the bond yield is sending a signal. Now might be a good time to watch for dips and lock when rates retreat.
• If you’re in variable: No change for now — BoC’s next move is still likely in October.