The Canadian real estate industry may focus on rate decisions, but the mortgage industry is watching bond markets. The Government of Canada’s (GoC) 5-year bond yield—a key benchmark for fixed-rate mortgages—has surged in recent weeks, pushing borrowing costs higher instead of providing relief. The move reflects rapid market repricing, driven by stronger economic data and a global trend of rising yields.

What Does Government Debt Have To Do With My Mortgage? 

Mortgage rates are based on benchmark borrowing costs for similar terms. The Bank of Canada’s overnight rate gets virtually all the attention, but it only impacts variable-rate mortgages. Canadian borrowers tend to prefer the stability of fixed-rate mortgages, which are priced off GoC bond yields of matching durations. The 5-year is of particular importance, as it’s the traditional weapon of choice for homeowners.

Government bond yields are set by supply and demand. When investor demand grows faster than government borrowing, yields fall. When government borrowing outpaces demand, yields rise to attract capital. Investor appetite is further shaped by inflation and global competition, as capital flows towards markets offering the best balance of risk and return.

Mortgage rates reflect these yields, plus a lender spread.

Canadian Government Bond Yields Are Surging, Applying Upward Pressure On Mortgage Rates

Recent economic data and upward revisions have pushed GoC bond yields sharply higher. The 5-year GoC yield jumped 19 basis points (bps) over 5 days, settling at 3.0% yesterday. It’s added 23 bps over the past month, reaching the highest level since August 2025. Any lender cuts right now would be margin compression, not market-driven.

The odds that this move is a short-lived blip are also fading. Over the past year, the 5-year yield is up 11 bps, barely half of the increase seen in the past month alone. That divergence signals a rapid repricing of expectations rather than a gradual trend, consistent with stickier inflation assumptions and stronger-than-expected economic data.

This is new territory for Canadian real estate. Before 2022, the GoC 5-year yield only touched 3.0% briefly in 2010 and hasn’t been past that threshold persistently since 2008. As financing conditions revert towards those norms, it raises uncomfortable questions about sustainability given that home prices have climbed 105% since 2010, while incomes grew just 35%. This topic warrants a deeper dive at a later date, but it’s worth keeping in mind.

For now, let’s get back to the topic of rising yields—and how this trend is driven by more than local factors.

Canadian Bond Yields Are Being Pulled Higher By A Global Surge

Rising bond yields aren’t just a Canadian phenomenon. This morning BMO Capital Markets released a new research note on rising yields across advanced economies. “…government bond yields across much of the advanced economies this year [are climbing], and despite central bank interest rate cuts in many cases,” explains BMO Chief Economist Douglas Porter.

“In Canada, 10-year GoCs are on track to end the year higher than they began 2025, despite the fact that the BoC has chopped rates 100 bps this year. The late-year shift in BoC rate expectations played a part, but so too has the upward pull from the rest of the world.”

BMO’s analysis places Canada in the context of two key markets: the UK and Japan. The UK tracked closely with Canada for roughly 15 years before its recent divergence, driven by investor concerns over the UK’s fiscal picture. Japan’s long-stagnant economy is now seeing its 10-year yield approach 2% for the first time since the late 1990s.

Government debt across advanced economies competes for global capital based on yield. Central banks can temporarily suppress borrowing costs in an emergency, but that relief comes at the price of higher inflation. Over time, this creates higher funding costs as investors demand a globally competitive yield and protection against inflation and currency erosion.

Written by Better Dwelling

On November 4, 2025, the Federal Government presented the 2025 Federal Budget, titled “Canada Strong”. There are a number of significant measures that will affect businesses, including immediate expensing for manufacturing and processing buildings, an increase to the expenditure limit for the Scientific Research and Experimental Development (SR&ED) program, and certain clean energy input tax credits.

Additional measures in the Budget include the removal of the Underused Housing Tax, the elimination of the luxury tax on certain aircraft and vessels, and a deferral of the trust reporting requirements for bare trusts to 2026. Also announced were new rules to expand on the anti-avoidance measures relating to the 21-year anniversary of a trust, as well as anti-avoidance rules for the deferral of tax on investment income using tiered corporate structures.

The measures introduced in the Budget are proposals and not all of the announcements may be enacted into legislation. There is still uncertainty as to whether the proposals will ultimately be implemented as outlined in the Budget documents as well as the timing of when they will be effective.

Full details of Budget can be found by clicking here. Summarized below are a few of the items we believe are most relevant to private companies and individuals.

Business Tax Measures

Corporate income tax rates

No changes to the corporate income tax rates are proposed. As such, the income tax rates as of January 1, 2025, will remain as follows:

Immediate expensing for manufacturing and processing buildings

Currently, eligible buildings in Canada used to manufacture or process goods for sale or lease (manufacturing or processing buildings) are prescribed an annual tax deduction rate of ten per cent (capital cost allowance). The Budget proposes immediate expensing (100% tax deduction) for the cost of eligible manufacturing or processing buildings. This includes the cost of eligible additions or renovations made to such buildings. The incentive is available in the first taxation year that the eligible property is used for purposes of manufacturing and processing of goods for sale or lease, and requires that at least 90% of the floor space of the building is utilized for these functions.

This benefit is for eligible property acquired on or after November 4, 2025 and before 2030. The rate of depreciation is reduced to 75% for 2030 and 2031, to 55% for 2032 and 2033, and then after 2033 the enhanced rate will no longer be available.

Tax deferral through tiered corporate structures

The Budget proposes anti-avoidance provisions relating to the deferral of tax on investment income with a corporate structure that has entities with staggered taxation year-ends. The proposed rules would suspend the dividend refund of a payor corporation upon payment of a taxable dividend if the recipient corporation’s balance due date for the taxation year in which the dividend was received ends after the payor corporation’s balance due date for the year in which the dividend was paid.

The corporate tax refund will be suspended until a payment is made by a corporation in the chain to individual shareholders, or to companies which have less than a 10% share ownership or are not under common control (i.e., corporations that are not “connected”). To accommodate genuine commercial transactions, the rule would not apply to a dividend payor that is subject to an acquisition of control where it pays a dividend within 30 days before the acquisition.

The rules will apply to dividends paid in taxation years that begin on or after November 4, 2025.

Enhancement of Scientific Research and Experimental Development (SR&ED) Tax Credits

The expenditure limit qualifying for the higher investment tax credit rate of 35% is proposed to be increased to $6M annually. This is a significant change from the proposed $4.5M limit announced in the 2024 Fall Economic Statement. The increased limit applies retroactively to taxation years beginning on or after December 16, 2024.

Certain proposals from the 2024 Fall Economic Statement were also confirmed by the government in that there is still an intention to implement the changes. This includes the enhanced investment tax credit rate of 35% (versus the lower 15%) being available to small Canadian public companies and larger private corporation groups, based on taxable capital. Previously, the higher rate was only available for Canadian-controlled private corporations. The phase out of the higher rate begins at $15M of taxable capital (increased from $10M) amongst an associated group, and is eliminated at $75M (increased from $50M). Certain capital expenditures used in SR&ED will qualify for a 100% deduction. Further, the budget contains a plan for an elective pre-claim approval process for vetting of SR&ED projects in advance by the CRA, with a targeted review time of 90 days.

Critical Mineral Exploration Tax Credit (CMETC) and Canadian Exploration Expense (CEE)

The budget expands the eligibility for the CMETC (which is equal to 30% of specified mineral exploration expenses incurred in Canada and renounced to flow-through share investors) for the following criterial minerals: bismuth, cesium, chromium, fluorspar, germanium, indium, manganese, molybdenum, niobium, tantalum, tin, and tungsten. This applies to expenditures renounced under eligible share agreements entered into after November 4, 2025 and on or before March 31, 2027. Starting November 4, 2025, the budget also clarifies that expenses incurred for purposes of determining the quality of a mineral resource do not include expenses relating to determining the economic viability or engineering feasibility of the mineral resource.

Personal Tax Measures

Personal Income Tax Rates

There were no changes to the personal income tax rates except for a decrease to the lowest federal tax bracket from 15% to 14.5% for 2025, and to 14% for 2026 and later taxation years. The lowest federal tax bracket of 14.5% for 2025 applies to taxable income of up to $57,375.

B.C.’s top personal income tax rates for 2025 continue to be as follows:

Home Accessibility Tax Credit

Applicable to 2026 and subsequent taxation years, expenses claimed under the Medical Expense Tax Credit cannot also be claimed under the Home Accessibility Tax Credit. The Home Accessibility Tax Credit is a non-refundable tax credit that applies at the lowest personal income tax rate on up to $20,000 of eligible home renovation or alteration expenses per calendar year.

Canadian Entrepreneurs’ Incentive

The Budget affirms that the elimination of the proposed capital gains inclusion rate increase would result in the removal of this proposed measure.

Personal Support Workers Tax Credit

The Budget proposes to introduce a temporary credit which would provide eligible personal support workers working for eligible health care establishments with a refundable tax credit of 5 percent of eligible earnings, providing a credit value of up to $1,100. The person must ordinarily provide one-on-one care and essential support to optimize and maintain another individual’s health, well-being, safety, autonomy, and comfort, consistent with that individual’s health care needs as directed by a regulated health care professional or a provincial community health organization. The person’s main employment duties must include helping patients with activities of daily living and mobilization. The Budget states that amounts earned in BC are not considered eligible earnings.

Alternative Minimum Tax (AMT)

The Budget confirms that the government intends to proceed with proposed legislation relating to the AMT, including one measure that would restrict the deduction of investment counsel fees (portfolio management fees) to 50% of the expense for purposes of calculating the AMT.

Other Tax Measures

21-year anniversary rules for trusts

The anti-avoidance provisions relating to the 21-year anniversary deemed disposition rules for trusts are proposed to be expanded to include indirect transfers of trust property to other trusts, effective on or after November 4, 2025. These measures are intended to address tax planning that avoid the deemed disposition to beyond the 21-year timeframe, including cases where trust property is transferred on a tax-deferred basis to a corporate beneficiary that is owned by a newly settled trust.

Trust reporting requirements for bare trusts

The Budget confirms the government’s intention to proceed with proposed draft legislation as it relates to reporting requirements for bare trusts, however the rules are now proposed to become effective for taxation years ending December 31, 2026 or later. Therefore, bare trusts are not required to file T3 trust income tax returns for the 2025 tax year.

Luxury tax on aircraft and vessels

The Budget will cease the luxury tax on subject aircraft (with a value over $100,000) and vessels (with a value over $250,000) after November 4, 2025, but will remain applicable to vehicles costing over $100,000.

Carry back rule for estates

One proposal announced in Budget 2024 was to extend a loss carry back for qualifying estates from the first taxation year, to the first three taxation years instead. The Budget provides that this will proceed with retroactive effect to deaths on or after August 12, 2024.

Underused Housing Tax (UHT)

The UHT will be repealed entirely for the 2025 taxation year and onwards. As a result, no UHT would be payable and no UHT returns would be required to be filed.

Automatic tax filing for lower-income individuals

The Budget proposes to provide the CRA with discretion to file a tax return on behalf of lower-income individuals for 2025 and onwards. Eligible individuals include those that have a taxable income below the federal basic personal amount or provincial equivalent (for 2025, the federal amount is $16,129), where all of the income of the individual is from sources for which specified information returns (such as a T4 slip) have been filed with the CRA, and the individual has otherwise not filed a tax return within 90 days following the filing deadline for the year. The individual then has 90 days to review the processed filing by the CRA and submit any changes, or may opt-out of automatic tax filing.

Previously announced tax measures reaffirmed

The Budget confirms that the government intends to proceed with certain previously announced tax measures including: capital gains rollover on Small Business Investments, Substantive Canadian Controlled Private Corporations, exemptions for Employee Ownership Trusts, Excessive Interest and Financing Expenses Limitation Rules, Lifetime capital gains exemption changes, and other rules.

For more information on how any of the proposed changes may have on your business or you, contact your Rise Advisor.

Your Business. New Heights.

Rise CPA provides professional accounting, tax and business advice to help you make the right decisions at the right time. Since 1979, we’ve been helping clients create businesses and lifestyles they envision by delivering expert insights and financial guidance. At Rise, we excel at advising business owners and their families in a caring and personal way. Our services cover a wide range of Tax Planning, Auditing, Accounting, Estate Planning, and Business Advisory. Please call (604) 936-4377 or use the online contact form to book an appointment with one of our accounting professionals.

Written by Rise Advisors

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PwC also anticipates the growth of prefabricated and modular homes in 2026, provided the financing options adapt.

The British Columbia government is proposing changes to its short-term rental laws, including allowing for compliance orders and penalties to be published to deter people from breaking the rules.

Housing Minister Christine Boyle tabled an omnibus housing bill in the legislature, which would make changes to multiple pieces of legislation including the Local Government Act, the Vancouver Charter and the Short-Term Rental Accommodation Act.

Along with the short-term rental changes, the government says the bill would ensure all local governments are meeting small-scale, multi-unit housing requirements that allow for more forms of housing, such as triplexes, row homes and townhouses.

The Housing Ministry says in a statement that the changes will prevent local governments from putting in restrictions that “make it more difficult to build anything other than single-family or duplex housing for communities with more than 5,000 people.”

The changes would also ensure that housing development isn’t limited because a city has rules on parking spaces per unit.

Boyle told reporters at the legislature that the majority of B.C. communities are implementing the province’s rules to build more homes to ease the housing crisis.

“There are a number of communities where there has been a bit more resistance, or where we’re seeing challenges around implementation, and the priority here is consistent implementation across municipalities,” she said after tabling the bill on Thursday.

“These tools will allow us to work with those local governments and push if needed, to make sure that the regulations are applied consistently and that more housing options are available in every community across B.C.”

Cori Ramsay, the president of the Union of B.C. Municipalities, said she expects local governments are going to be disappointed that the province continues to “centralize decision making for housing in Victoria.”

Ramsay, who is a city councillor in Prince George, said Thursday that requiring the same approach to density in all parts of a community drives up the cost for water, sewer and other core services.

“We all have different needs and the ability to maintain local planning at the local level, with local leaders who are in touch with residents, who know their communities, that is essential. That is part of that long-term infrastructure planning process,” she said.

Centralizing decision making around housing from the B.C. legislature takes away from the local residents and leaders being able to make those land-use decisions, she said.

Ramsay said it will have “negative consequences for local government across the province, and it’s going to result in significantly higher infrastructure costs for us.”

Written by The Canadian Press

Canadian stocks hit a new all-time high despite tariff threats and a weakening economy.

The S&P/TSX Composite Index rose 0.3% to climb above the key psychological threshold of 30,000 for the first time on Tuesday. The gauge has posted 45 closing records this year, the most since the recovery from the Covid-19 pandemic in 2021. The rally is being driven by stronger than expected earnings, a flight to shelter in gold names and easing in borrowing costs. And a fresh round of Bank of Canada interest-rate cuts is expected to stoke gains.

“It’s a big milestone obviously because it’s a nice round number,” said Philip Petursson, chief investment strategist at IGM Wealth Management, a firm with $143 billion in assets under management. He added the strength of the benchmark’s performance this year and the milestone would “drive investors to take another look at the TSX.”

The Toronto Stock Exchange is on track to outperform the S&P 500 Index this year for the first time in an up year for both markets since 2016. During that period the TSX suffered a smaller loss than the S&P 500 during the downturn of 2022.

Corporate earnings in Canada have, so far, beat expectations this year at a time when U.S. President Donald Trump has slapped the country with tariffs and when unemployment has trended higher. Amid economic weakening and trade uncertainty, earnings by TSX stocks came in 7.5% ahead of expectations and marked a new high, according to Hugo Ste-Marie, director of portfolio and quantitative strategy at Scotiabank.

“If we had to describe it in one word, we would say: wow!” Ste-Marie wrote in a Sept. 15 note.

Gold miners have been the biggest driver of the TSX rally this year as bullion prices have hit all-time highs and demand for safe haven assets amid geopolitical, trade and interest-rate uncertainty intensify.

According to Fiera Capital Corp. portfolio manager Candice Bangsund, gold represents nearly 12% of the TSX.

The benchmark’s leading sector, materials, has gained 72% this year on the the back of triple-digit gains from the likes of Discovery Silver Corp., SSR Mining Inc. and Lundin Gold Inc.

More support ahead

Bangsund, who said the Canadian equity markets is more attractively valued than its global peers, sees the materials sectors continuing to prop up the Toronto Stock Exchange through 2026.

“Even if there’s decreased demand for oil products or materials products from the U.S. from Canada, if a product like gold is becoming more expensive on net, it creates a bit of a buffer, a bit of an offset” for stocks, said Bloomberg Intelligence strategist Gillian Wolff.

Gold, which strengthens when interest rates fall, is expected to fuel further gains following rate reductions in Canada and the U.S.

“The rate cut advantages everything,” said Brian Madden, chief investment officer at First Avenue Investment Counsel. In addition to gold stocks, he noted the TSX is heavily concentrated in rate-sensitive defensive sectors including utilities and telecommunications as well and financials, all of which are likely to continue performing well.

A handful of standout individual stocks have also lifted the index. Toronto-Dominion Bank and e-commerce provider Shopify Inc., in particular, have provided the two largest boosts to the gauge this year. Shares of TD Bank staged a sharp recovery this year after a series of scandals in 2024 led to restrictions on its expansion in the U.S. and executive changes.

Overall, Canada’s banks have held up better than expected in the face of tariffs and a macroeconomic slowdown. All but one of the Big Six banks came ahead of analyst expectations in the third quarter as the country’s largest lenders set less money aside for potentially bad loans.

Shopify, meanwhile, has climbed this year to briefly become the country’s most valuable stock on a combination of “blowout” quarterly results and general strength in the tech sector.

Written by Bloomberg

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