Rate Hikes, Bond Yields & Buying Power

If you’ve been watching mortgage rates in 2025 and wondering, “Wait… didn’t the Bank of Canada just hold rates steady? So why are mortgage rates climbing again?”—you’re not alone.

I’ve been having this conversation daily with buyers, sellers, and people just trying to make sense of what the heck is going on. So I want to break it down in plain language and share what I know—not as a mortgage broker (because I’m not one), but as a REALTOR® who pays attention to what’s happening in Edmonton real estate, and who cares about helping you make informed decisions.

What’s Happening With Rates—And Why It’s Confusing

On July 30, the Bank of Canada held its overnight rate at 2.75%. That’s the rate most people hear about on the news. It influences things like variable-rate mortgages, lines of credit, and the prime rate.

But here’s the part that often gets missed: fixed mortgage rates are not tied to the Bank of Canada’s rate. They’re tied to bond yields—specifically, the 5-year Government of Canada bond yield.

So why are fixed rates going up right now?

Because bond yields have been climbing. Investors are nervous about inflation staying sticky and are betting that rates will remain elevated longer than expected. As bond yields rise, banks raise their fixed mortgage rates to keep pace.

It’s not about panic—it’s about pricing risk.

If You Have a Rate Hold or Pre-Approval Right Now—Please Read This

If you were pre-approved in the last 2–3 months and you’re holding a rate around 4.00%, you’re in a good spot—but the clock is ticking.

Many lenders only guarantee that rate for 90–120 days, and I’ve heard from clients that extending that rate now isn’t always an option—or comes with a higher price.

That means:

• If your rate hold is expiring in the next 30 days, it’s time to get serious about your timeline.

• If rates jump to 4.5% or higher (and some already have), your monthly payment or borrowing power could shift meaningfully.

Talk to your lender or broker. Get clear on your expiry date. And make sure your approval still lines up with your goals.

Fixed vs. Variable in Late 2025: There’s Almost No Gap

Traditionally, variable rates were cheaper, and people took them to save money long-term. But right now? The difference is almost gone.

In many cases:

• Fixed rates are sitting around 4.2%–4.6%

• Variable rates are 4.0%–4.5%, depending on the lender

So what do you do?
That’s a personal decision. A good mortgage broker can help you compare scenarios, including:

• Your risk tolerance

• Your future plans (Are you staying put for 3–5 years?)

• Whether you’re okay with fluctuations in your payment

What Edmonton Buyers Should Keep in Mind

This is where I bring it home.

As a REALTOR® in Edmonton, I’m not here to tell you when the market will peak or where rates will go—but I can tell you what we’re seeing on the ground:

✅ Well-priced homes under $600K are still moving
✅ Inventory in some neighbourhoods is tight
✅ Buyers with rate holds are trying to secure something before they expire

If you’ve been sitting on the fence, hoping rates drop before you buy: just know that rate increases could reduce your buying power faster than prices fall.

For example, a half-point rate increase could shrink your mortgage qualification by $20,000–$40,000, depending on your income and debt. That might mean fewer options—or needing to compromise on location, size, or condition.

What Sellers in Edmonton Should Know

Higher rates don’t mean people stop buying. But they do mean buyers become more cautious, price-sensitive, and value-driven.

That’s why:

• Pricing matters more than ever

• Presentation and marketing matter more than ever

• Transparency around costs (condo fees, utilities, mechanicals) can help your home stand out

We’re still seeing strong results in Edmonton, especially for:

• Move-in ready homes in established neighbourhoods

• Properties with revenue potential (like suites or garden suites)

• Townhomes and duplexes with manageable condo fees or none at all

What Might Happen Next (And What I’m Watching)

I follow rate forecasts because they matter to my clients, but I don’t pretend to predict the future.

That said, most experts expect:

• One or two small rate cuts before the end of 2025

• Bond yields to soften slightly if inflation continues to cool

• Fixed rates to stabilize or potentially drop a bit by Q4

But none of that is guaranteed. And more importantly—you can’t buy a house in hindsight.

Final Thoughts

If you’re buying or selling in Edmonton, here’s my advice:

🧭 Don’t try to time the market.
📊 Know your numbers.
🔍 Ask questions (no one should ever make you feel bad for asking).
🤝 And work with people who care more about your long-term success than a quick sale.

That’s how I’ve built Iconic YEG. And if you’re thinking about making a move, I’d love to be in your corner.

Let’s make a plan—not a panic.

—
Caitlin Heine
REALTOR® + Owner, Iconic YEG Real Estate Team of RE/MAX
📞 587-336-3176
📍 Edmonton, Alberta
🌐 iconicyeg.com
📷 @iconic.yeg