It seems central bankers can’t keep the United States economy down — despite a 23-year high in the world’s most important interest rate, the U.S. Fed funds rate.

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Spillover effect from strong U.S. economy could boost Canadian mortgage rates Back to video

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That’s a problem if you’re craving lower mortgage rates. U.S. Federal Reserve policy ripples through global borrowing costs, including Canada’s. With real-time U.S. GDP estimates tracking at well over three per cent, there’s a fear in the back of investors’ minds that the U.S. economy may be too strong, creating upside risk in inflation. Canadian bond yields are getting caught in the updraft.

Higher yields usually lift fixed mortgage rates, so mortgage watchers are on the lookout for any rebound in borrowing costs. Lenders have some leeway, though, and competition is stiff. It’ll probably take more bond selling (yields rising) before big banks lift fixed pricing en masse.

In the meantime, keep a side-eye on Friday’s Canadian job report — it could jostle rates if hiring and wages come in hot.

All this macro noise aside, if you need financing in the next four months, it’s never a guessing game. The smart play is to skip the crystal ball and lock in a rate with a pre-approval. That way, the economy can do whatever it wants and rising rates won’t hurt you.

As we speak, you can snag a pre-approval in the four per cent range if you need an insured mortgage. A 4.99 per cent three-year fixed is the sweet spot for conservative borrowers, based on the lowest nationally-available offers.

That three-year fixed costs more on the uninsured side: about 5.39 per cent. Such are the realities of Canada’s mortgage market. You pay a premium for the privilege of a bigger down payment (because there’s no government-backed insurance to cover lenders’ backside if you don’t pay).

On the variable end, there was no movement in leading nationally advertised rates this week.

Off On the Horizon

Let’s wrap up with a peek at the bond market’s tea leaves. Forward rates — interest rates that apply to future financial transactions — now imply three Bank of Canada rate cuts this year, starting in July. That’s down from four cuts a few weeks ago, according to CanDeal DNA.

The forward market projects two percentage points of cuts in total, which would theoretically take Canada’s benchmark prime rate from 7.20 per cent today to 5.20 per cent.

Until core inflation is back below three per cent, we shouldn’t read too much into the timing or magnitude of rate-cut projections. They’ll remain volatile. The point is, despite a modest risk of another hike, rate relief is likely coming later this year.

Robert McLister is a mortgage strategist at FixedorVariable.ca and editor of MortgageLogic.news. You can follow him on Twitter at @RobMcLister.