The short answer
Governments borrow by selling bonds, and right now governments around the world have borrowed so much that the big buyers of those bonds, such as pension funds, are nervous about how much is out there. To get them to buy, the return on offer has to rise. That return is the yield. Fixed mortgage rates in Canada tend to follow government bond yields, so when yields climb, fixed rates usually follow. In Mike’s view, as of October 2026, this is being driven by government spending rather than a strong economy, which is also why he doubts talk of several more rate hikes.
Bonds in plain English
A government bond is a loan to the government. It’s considered a safe bet, so when stock markets look shaky or there’s a war, big investors move money out of stocks and into bonds. Normally that steady demand keeps yields in check. Mike’s analogy: if every house in Kelowna went on the market at once, prices would have to drop to find buyers. When there are more bonds than willing buyers, the yield has to rise to attract them. A higher yield is effectively a lower price for the bond.
Will rising US rates hit Canada?
Dallas asked about reports of US rates going up as many as four times next year. Mike doesn’t buy it. Rates usually go up to cool a strong economy, and the world economy isn’t strong. Inflation today, in his view, is mainly about government overspending in Canada, the US and elsewhere, and raising rates doesn’t stop governments spending. He expects maybe one more increase, with the inflation risk from oil easing once the war is sorted out.
What this means for your mortgage
Fixed rates move with bond yields; variable rates move with the Bank of Canada’s rate decisions. If you’re choosing between them, read fixed vs. variable: a planning decision, not a rate prediction. If your renewal is coming up while yields are moving, here’s when renewing early makes sense and how a rate hold protects you. This is general commentary as of October 2026, not personal financial advice. Rates change, and the right move depends on your own situation.
Plus: the biggest mistake sellers make
The video opens with Dallas Crick of Hilbert & Crick Real Estate Group on listing: be 100% ready before the photos, video and 3D tour, including asking tenants to put their things away ahead of time. More from Hilbert & Crick.
More videos: See the full series with Mike Lloyd and Dallas Crick.
Full transcript
Mike: Hey Dallas, right now as it sits, what mistakes do you see people making when they list their properties?
Dallas: They’re not ready. Be 100% ready to go. You want to have your photos, your videos, everything lined up. When we come there to shoot and you still have stuff all over your house, or if you have a renter, just get them to clean up if you can, because it makes a big difference when it comes to photos, when we’re doing a video, or even the 3D tour when it’s scanning and going through bedrooms. And if they have stuff they need put away, because it’s only renters that complain about their stuff being photographed, have them put their stuff away ahead of time.
Dallas: So talk to me. I’m hearing rates in the States are possibly going up four times next year. What do you think? How’s that going to impact Canada?
Mike: I don’t believe it, first of all. They did what they did, which is raising it just recently, but now there’s talk of there being a lot more. Oh, it might take a little while. I mean, the overall world economy is not strong. You raise rates when the economy is strong, and it’s to fight inflation. And inflation historically, if you look, usually the economy is strong, and that’s what causes inflation. That’s not what’s going on now. It’s overspending by the governments, in Canada, the US, all over the place. There’s just too much government debt, and that’s really what’s causing inflation. So raising rates doesn’t stop the government from spending money. That’s the problem. They’re kind of stuck in a corner. They’re trying to do something that’s not really the solution anymore, and the world’s evolved. So I know there’s a lot of talk about it. I don’t buy it. I think we’re going to see maybe one more next year. I just don’t see how the economy… once the war gets sorted out, the inflation risk from oil goes down. And now it’s just about government spending. It’s not about us buying too many things or spending too much money.
Dallas: Okay, here’s one for you. Like myself, I’d say 95% of Canadians are financially illiterate. Let’s talk about the bond yield. It’s going up. Why is it going up? Just put it in a nutshell. No one understands it, so let’s just talk about that.
Mike: So the Bank of Canada has to borrow money to pay for it. We don’t have enough money. We overspend. And that’s what bonds are. They issue them. They’re secured by the government of Canada, and so they’re a safe bet. That’s what they are. They sell them. And then what happens is the big players, like pension funds and the Ontario Teachers’ Pension Plan, that’s a big one, a bunch of the big players who buy 100 million, 200 million and things. When they’re in the stock market and the market looks good, they stay in the stock market. But when the market isn’t so good, they sell and they buy into safe bonds. That’s when there’s wars, or they’re nervous. And historically, that’s worked pretty well. But what’s happening right now is there’s so much government debt all over the world that the bond people, the people who buy a lot of bonds, are getting nervous about whether this government can really back all this money, because there’s so much money involved. And that’s what’s causing the bond yields to go up. Because they’re not buying as much as they would normally, that causes the yield to go up. So it’s kind of like you’re selling a car: you’ve got to keep dropping the price. That’s what a yield is. They’ve got to increase the yield to get people to buy it. So yields go up, and they have to raise the yield to sell them. It’s because there’s so much, it’s swamping the market. If every house in Kelowna went on the market, you’d have to drop prices, right? And that’s what that yield situation is. So it’s complicated. It’s hard to give you a really fast answer, but that’s what’s going on right now. Yields are going up because of the world economy. There’s too much spending. Nobody’s reining it in. And that has to change fundamentally before we’re going to see bond yields calm down a lot.
Dallas: So it’s safe to say that bond yields are going up because no one wants to buy them, so there has to be some incentive to buy these things.
Mike: Exactly.
Dallas: I’m thinking everyone knows inflation’s higher than 5%. You’re still losing money at this amount. So in my opinion, that’s why bonds are going up.
Mike: Yep, 100%. You’re right on.
If you’d like to talk through what rising yields mean for your own renewal or purchase, book a free, zero-pressure strategy session.
Frequently asked questions
Why do bond yields affect mortgage rates in Canada?
Lenders fund fixed-rate mortgages at rates that track government bond yields of a similar term, so when those yields rise, fixed mortgage rates tend to rise with them. Variable rates are tied to prime, which moves with the Bank of Canada’s policy rate.
Why are bond yields going up in 2026?
In Mike Lloyd’s view, heavy government borrowing worldwide means there are more bonds for sale than investors are keen to buy, so yields have to rise to attract buyers.
Will mortgage rates keep going up?
Nobody knows for certain. Fixed rates follow bond yields, so they tend to rise if yields keep climbing. Variable rates follow the Bank of Canada. The safer plan is one that still works if rates move against you.
