Mortgage Rates

Excellent question from a kind reader:

What do you think the 'closed 5yr' intrest rate for a mortgage will be in 5
years time? I have to renew and I have pre-approved for a 5yr closed rate for
3.95%.

I can't "do" advice here, but I will repeat what I said to a family member the other day and what I believe that the facts are:

1) Normally, it does not make sense to lock in for 5 years as you pay a premium.
2) However, these are not normal times
3) Interest rates are at multi-generational lows. Mathematically, mortgage rates can not go much lower, but they can go a lot, lot higher.
4) Those interest rates have begun to back up and I think that interest rates are going much, much higher at the long end over the next few years (ie 10-30 year government bonds) despite upcoming deflation as there is too much supply and not enough reward (ie yield) for the risk of default. I could be wrong on this
5) As we saw in the fall, when bank lending dries up and their cost of capital increases, prime and mortgage rates can vary from "normal". If we get a banking crisis in Canada, mortgage rates could soar even if government bond yields stay low.
6) A run on the Canadian dollar could send Canadian interest rates rising
7) Sleeping well at night and having a super low 5 year rate that can not change would be great to me.
8) My sense is that mortgage rates are going to creep up very soon, as the bond market has sold off sharply in recent weeks.