Weekly Market Pulse

December 1, 2025

Every week I review the same core data points, and this week the overall picture showed a market settling into a more stable interest rate environment, even as a few small movements reminded me that financing conditions remain sensitive. Here’s what caught my attention as I walked through the latest numbers.

Canada 5-Year Bond at 2.76 Percent

The first thing that stood out was the firming of the mid-curve, particularly the 5-year Canada bond, which closed at 2.76 percent. It moved higher by 3 basis points and is up 12 basis points month over month. This is relevant because the 5-year remains the benchmark that lenders reference most closely when pricing conventional and CMHC-insured mortgage rates. When that yield moves 10 to 15 basis points, the corresponding mortgage rate tends to follow in almost the same proportion. On a five million dollar acquisition at 60% loan to value, a ten basis point increase in the benchmark adds roughly three thousand dollars a year in interest costs, which is about two hundred fifty dollars per month. That difference can be enough to move a debt service coverage ratio from compliant to strained, so even small movements in this specific yield matter for real estate cash flow and valuation. I am also watching whether the recent uptick signals a broader shift toward slightly higher mid-term funding costs.

Yield Curve Analysis

The yield curve continues its gradual normalization. The one-year sits at 2.34 percent, the three-year at 2.56 percent, the five-year at 2.76 percent, the seven-year at 3.00 percent, and the ten-year at 3.23 percent. The curve is positively sloped from short to long maturities, which contrasts sharply with the inverted structure we saw not long ago. A curve that rises by nearly one hundred basis points from the one-year to the ten-year suggests that recession fears have moderated, inflation expectations are stabilizing, and the market is pricing in steadier long-term growth. For real estate, a more traditional curve usually aligns with healthier lending sentiment and a more rational spread between cap rates and borrowing costs. Although the shift is modest, the direction supports underwriting that assumes stable, rather than falling, interest expense.

Current Financing Environment

Financing conditions remain mixed but improving relative to the peak volatility of the past two years. The CMLS 5-year closed rate sits at 3.99 percent, the five-year ARM is at 2.06 percent, uninsured five-year fixed stands at 4.49 percent, and the uninsured ARM is at 4.03 percent. The Bank of Canada’s posted residential mortgage rate is now 6.07 percent. These numbers are still above long-term averages, yet they fall well below the stress levels of late 2023. In practice, being able to secure a sub-4 percent five-year fixed provides meaningful room for cash flow stabilization, especially for assets with clear operational upside. The spreads over the Government of Canada curve have been relatively stable, and that stability matters as much as the absolute level of rates.

Market Signals

The Bank of Canada’s policy rate remains at 2.25 percent, with no movement this week and no indications of imminent change, which reinforces the sense of macro stability I’m seeing across the fixed-income curve. Housing starts came in at 232,765 units, which is down 16.6 percent month over month, and that monthly drop is the more relevant signal for near-term supply pressure. A slowdown of that size tells me that the construction pipeline is still struggling to maintain momentum, even with policy support and strong underlying demand. I’m also watching closely how this contraction interacts with population growth and rental absorption, because the mismatch between completions and household formation remains one of the central drivers of upward pressure on rents.

My Strategic Positioning

I intend to pursue acquisitions where I can lock financing near the current five-year closed rate, prioritizing assets with immediate NOI growth potential. I plan to model exit cap rates twenty to thirty basis points higher than earlier this year, reflecting the now more positively sloped curve. I will evaluate selective refinances if spreads compress another 10-15 basis points, particularly on mid-cycle loans originated during the more volatile period of 2023.

Macro Context

It is important never to look at real estate in isolation, so I continue to factor equity market behaviour into my thinking. The TSX sits at 31,262, rising 0.3 percent on the day and 3.4 percent on the week, while the S&P 500 closed at 6,823 with gains of 0.2 percent on the day and 2.1 percent on the week. Rising equity markets tend to bolster consumer confidence and financial stability, which indirectly supports rental demand, especially in the middle and upper segments of the multifamily market. I am not basing underwriting on equity performance, but the broader macro environment still leans constructive.

Bottom Line

The data this week points to a market that is neither overheated nor weakening, but instead settling into a stable rhythm that supports disciplined acquisitions. Yields are firm yet manageable, mortgage rates remain historically reasonable, and supply constraints continue to underpin rental demand. These are the same data points I review every week, and collectively they suggest a steady environment where careful underwriting and selective buying can still produce strong long-term outcomes.