Fixed mortgage rates in Canada have fallen in recent days as risks to the economy push Canadian bond yields to significant lows, a mortgage expert says.

Five-year government bond yields recently hit their “lowest point in a year,” Ron Butler, a mortgage broker at Butler Mortgage, told Yahoo Finance Canada. Fixed-rate mortgages, which follow the trajectory of bond yields, have consequently fallen, with some available rates below four per cent, Butler says.

“There was a brief moment of sub-4.0 in September 2024, and that went away,” he said. “And now we're back.”

In September, however, those rates were for high-ratio mortgages, which involve down payments of less than 20 per cent and are guaranteed by the Canada Mortgage and Housing Corporation, but which come with an additional cost for mortgage default insurance. Today, Butler says, even uninsured mortgage rates are turning up below four per cent, with CMHC-insured rates even lower.

“If it's a high-ratio mortgage, 3.89, that is radically less than it was a year ago,” he said.

Fixed rates have come into “a normalized interest rate environment,” a range in which they are more palatable to more people, says Frances Hinojosa, CEO and co-founder at Tribe Financial Group.

“Even though the sentiment with some economists is that prime's going to be back down through a lower level at the end of the year, some clients are not 100 per cent sure of it and they don't feel secure that it's not a guarantee,” she said.

“And with fixed rates now being a lot lower compared to where they were a year ago, there's more of a comfort level saying, 'OK, that fixed rate seems fine to me. I'm comfortable with the payments.’”

The implications of falling rates for people about to renew are significant. “For consumers, it's always smart to not take the first offer that you get on your renewal to actually shop it around,” said Hinojosa.

“We've been talking about this for years, but this year it's more important than ever to see what bank is going to give you the best rate.”

Because of the volume of mortgages up for renewal this year, banks are being “hyper-aggressive” to retain mortgage customers, Hinojosa says. “In a lot of situations, if you have more loyalty with that institution, you'll get a far better interest rate.”

“Once you have an actual quote” from another bank, Butler says, “your bank will react.”

For home buyers, the situation isn’t as clear, Butler notes. “The guy who's got a renewal, he has only one question: am I getting the best deal?” he said. But those thinking about buying need to ask whether they’re getting a good rate and whether they’re buying at a good time. The same economic worries putting pressure on bond yields and lowering mortgage rates point to a recession, Butler says, and a possible drop in home prices if it’s severe.