What the data shows
What does the recent increase in fixed mortgage rates signify for borrowers in the current economic climate? The answer lies in the interplay of global yields and inflation expectations, particularly influenced by the ongoing war in Iran. As of March 18, 2026, the U.S. 30-year mortgage rate has risen to 6.30%, a significant factor that has led to a 19% drop in refinance applications week over week.
The surge in fixed mortgage rates can be attributed to higher global yields, which have been exacerbated by inflation concerns stemming from geopolitical tensions. Edward Djan, an economist, noted, “Expect global inflation to get higher in the near-term with the war in Iran, that’s the message from the Bank of Canada as it keeps its key interest rate the same.” This situation has resulted in Canadian fixed mortgage rates tracking closely with the Government of Canada 5-year yields, which often align with U.S. Treasuries.
For borrowers, the implications of rising fixed mortgage rates are substantial. Higher rates increase monthly payments for new buyers and raise renewal costs for existing borrowers, making homeownership less affordable. As stated, “A fixed mortgage rates increase lifts monthly payments for new buyers and raises renewal costs for millions rolling off pandemic-era terms.” This shift is particularly challenging for those who secured lower rates during the pandemic and are now facing higher costs.
Moreover, the Office of the Superintendent of Financial Institutions (OSFI) stress test requires borrowers to qualify at a higher rate than their contract, often adding two points to the contract rate. This regulation means that many potential buyers may need to consider shorter terms or larger down payments to secure approval for their mortgages. The impact of these higher rates can also slow down originations and refinancing, affecting the fee income for lenders.
Recent data shows that the two-year swap rate increased from 3.603% to 4.03% between March 2 and March 16, 2026. This rise is indicative of market expectations for future interest rate increases. Adam French, a financial analyst, remarked, “The swap rate can be taken as an indication that markets are expecting at least a 0.25 percentage point rise over the next five years.” This expectation further complicates the landscape for borrowers looking to secure favorable mortgage terms.
In the context of these rising rates, the average rate on a new two-year fixed-rate mortgage has also seen a notable increase, moving from 4.78% on January 16, 2026, to 5.20% by March 16, 2026. Such increases are likely to deter many potential borrowers from refinancing, as higher rates reduce the number of borrowers who can save by doing so.
As the war in Iran continues to create economic shocks globally, affecting inflation and mortgage rates, the future remains uncertain for borrowers. While some may adapt to the new financial landscape, others may find themselves priced out of the market. Details remain unconfirmed regarding the long-term effects of these changes, but the immediate impact is clear: higher fixed mortgage rates are reshaping the housing market and the financial decisions of millions.
