Today’s mortgage borrower is facing some considerable rate pain; as the Bank of Canada continues its hiking cycle -- likely bringing its Overnight Lending Rate as high as 4.5% before it’s through -- those holding variable rates can expect to see their debt servicing costs soar.

But there isn’t much relief available for those thinking of taking the fixed-rate route, either. Bond yields -- the metric used by lenders when setting their fixed-rate mortgage rates -- have been on an absolute tear as of late, with the government five-year yield reaching 3.64% last week. That’s the highest reading since 2012 -- the earliest the BoC tracks such data -- and is a whopping 2.39% higher than the 1.25% recorded at the end of 2021. According to the Bank of Canada, the 10-year average is 1.37%.

Translation: It now costs roughly 2% more than this time last year to lock into a fixed-rate mortgage if you’re a brand-new borrower, while those coming up for renewal this year are in for some sticker shock.

Already, some of Canada’s largest lenders are in hiking mode. Last Wednesday, Scotiabank announced a 25-basis-point increase for its five-year featured fixed-rate, bringing it to 5.69% for a 25-year amortization, and 5.79% for a 30-year.

TD also announced a 20-basis point increase in fixed rate mortgages, bringing the five-year fixed to 5.59%.  According to rate comparison site Ratesdotca, non-bank lenders are also raising rates, by 20 to 30 basis points on average. 

The exodus from the bond market comes as talk of recession hanging heavy on investors’ minds, along with baked-in expectations of another BoC rate hike next week. That’ll deliver a double-whammy for borrowers, with the variable cost of borrowing to rise once again.

“Rate hikes are already cooling the housing market and another overnight rate hike has the potential to spark a sell-off of investment properties,” says Victor Tran, Ratesdotca mortgage and real estate expert. “Overall demand for housing will continue to decline and prices will continue on a downward trend. If the BoC hikes the overnight rate by 50 basis points, which it’s expected to do, many investors and those renewing mortgages in 2022 and 2023 will be hit hard.” 

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He adds that for every 50-basis point increase, a homeowner with a variable-rate mortgage can expect to pay approximately $28.00 more per month per $100,000 of mortgage. 

Another recent analysis from found that those renewing their fixed-rate mortgages today could expect to pay $445 more per month, based on a rate of 4.89% today compared to 2.26% in 2017.

“Households with fixed rates up for renewal in the coming months will see their monthly mortgage payment jump substantially,” said Co-CEO James Laird. “In order to make their higher mortgage payments, households will have to cut back in other areas.”