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December 5, 2025

The interest rate environment continues to be dynamic, unpredictable, and highly influenced by global forces rather than domestic fundamentals. This week brought a surprising combination of higher mortgage funding costs and unexpectedly strong Canadian job growth, both of which have implications for your upcoming mortgage decisions.

Why Mortgage Rates might Increase – very soon

Even though recent economic data in Canada and the U.S. remains soft, mortgage funding costs moved higher to start the week. The shift was driven almost entirely by global bond markets:

Bank of Japan Sparked a Global Bond Sell-Off

Bank of Japan’s signalled a possible December rate hike, pushing its 10-year yield to the highest level since 2006.
Global investors reacted immediately, sending yields higher worldwide—including here in Canada.

Domestic Data Would Normally Push Rates Down

Manufacturing in both Canada and the U.S. remains in contraction and under normal circumstances, this would lower Canadian rates.

But this week, global capital flows simply overwhelmed our own fundamentals.

Key Yield Movements Driving Fixed Mortgage Pricing

These increases add upward pressure on fixed mortgage rates:

Canada 5-year bond: +9 bps
5-year CMB: +8 bps
10-year CMB: +14 bps
4-year swap: +6 bps (3-month high)

Who feels these changes most?

Rate shifts particularly impact:

Mortgages under 65% Loan-To-Value ratio (low-ratio conventional)
Mortgages over 80% Loan-To-Value ratio (high-ratio insured)

These categories are the most sensitive to fluctuations in funding costs.

Blockbuster Canadian Job Report: Unemployment Drops to 6.5%

Today’s November Labour Force Survey delivered a third consecutive upside surprise, revealing:

53,600 new jobs added- Third straight month of stronger-than-expected growth.

Unemployment rate fell from 6.9% to 6.5%- The biggest monthly drop since 2022 and the lowest rate since July 2024.

Economists were expecting a decline, not a surge- Markets predicted job losses of 2,500 and an unemployment rate of 7%.

Youth employment led the surge- Youth unemployment dropped from 14.7% to 12.8%.

Labour force participation declined slightly- Fewer people looking for work helped pull the unemployment rate lower.

Wages rose 3.6% year-over-year- A moderate level—neither dangerously inflationary nor recessionary.

GDP also surprised to the upside- Q3 grew at an annualized 2.6%, well above expectations.

Job gains concentrated in: Part-time positions, private sector, Health care & social assistance (+46,000)

Looking Ahead to December 10

Here’s what markets are pricing in:

Bank of Canada: 92% probability of no change to Prime Rate (currently at 4.45%)
U.S. Federal Reserve: 92% probability of a 25 bps cut

What This Means for Mortgage Rates

Financial markets responded quickly:

The Canadian dollar strengthened
Bond yields moved higher. If this trend persists, expect fixed rates to increase imminently
Traders removed expectations of additional Bank of Canada rate cuts (December 10, 2025 is the next Bank of Canada scheduled announcement)
Markets have now priced in a 25 bps rate hike for Prime Rate by December 2026 (not 2025)

IMPORTANT: If Your Mortgage Renews Within the Next 6 Months…

You should reach out now to secure a rate hold.

Many lenders allow 120-day rate locks, which protect you from increases like the ones we are about to (potentially) see, while still allowing us to switch strategies if the market improves.

A rate hold today = protection in volatility + flexibility if rates drop

Planning to Buy in the Coming Months?

Prospective buyers should also consider:

Securing a pre-approval and rate hold
Locking in protection against global volatility
Keeping flexibility to capture lower rates if the market softens

In today’s environment, being prepared matters more than ever.

Have Questions About Your Renewal, Refinance, or Purchase?

The mortgage market is shifting quickly, and the best strategy depends on your specific timeline and loan-to-value position. If you’re within 6 months of renewal or planning a purchase, now is the ideal time to connect.

I’m here to help you navigate this environment – give me a call!