Market participants see rates and bond yields rising, with risks skewed firmly upward
Financial market participants have revised their interest rate and bond yield forecasts upward, with the median five-year Government of Canada bond yield climbing 35 basis points quarter-over-quarter to 3.50%, the Bank of Canada reported.
For Canadian mortgage brokers advising fixed-rate clients, the numbers signal continued pressure on long-term borrowing costs well into 2027.
The Bank of Canada’s third-quarter Market Participants Survey, conducted September 23 to October 1 among approximately 25 financial market professionals, recorded an identical 35-basis-point rise in the 2027 five-year bond yield forecast, to 3.45%.
Since five-year Government of Canada bond yields serve as the primary benchmark for fixed mortgage pricing, the upward revision carries direct renewal implications for brokers and their clients alike.
Rate risks tilt decisively upward
The survey reveals a sharp recalibration in market risk sentiment. Some 52% of respondents now view risks to their policy rate forecasts as skewed toward a higher path, up from 40% in Q2 2026.
Zero respondents see risk tilted toward lower rates, a reversal from 28% who held that view the previous quarter, and the clearest signal yet that markets have abandoned expectations of further relief.
The median policy rate forecast for December rose to 2.50% from 2.25%, with the consensus terminal rate settling at 2.75% from March 2027 through end-2028.
The Bank of Canada’s October 28 rate hike to 2.50%, which occurred after the survey window closed, aligned the actual rate with the December projection.
The median year-end 2026 Consumer Price Index (CPI) forecast also rose, to 3.0% from 2.6%, while GDP growth is projected at 1.6% for 2026 and 1.8% for 2027.
Canada’s labour market shed 4,700 jobs in October, pushing the national unemployment rate to 6.7% from 6.5%, a third consecutive month of deterioration that is now complicating the Bank of Canada’s (BoC) path to a December rate hike. https://t.co/dptjDonezZ
— Canadian Mortgage Professional Magazine (@CMPmagazine) November 6, 2026
What brokers should tell renewal clients now
Marc Ercolao, economist at TD Economics in Toronto, previously said that the October hike was designed to buy time.
“We think this hike buys the Bank a few months to assess whether higher energy and input costs are actually filtering through to consumer prices,” he said, projecting one further 25-basis-point increase in Q1-2027.
CIBC economist Andrew Grantham projected a December hold but sees the terminal rate at 2.75% all the same.
“We don’t expect that core measures of inflation will accelerate as much as the Bank fears, which should become more obvious early in 2027 and allow the Bank of Canada to then hold interest rates at 2.75% throughout the remainder of next year,” he said.
Joel Fox, chief operating officer of Ownright, a Toronto-based digital real estate law platform, stressed the need for proactive client conversations.
“If you’re renewing in the next year, start early. It’s a good idea to talk to your lender or broker, compare offers and know what your payment will be before the renewal notice shows up,” Fox explained.
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