The financial instability in Europe is giving Canadian homeowners a slight reprieve from rising mortgage rates.

Banks began a series of swift mortgage rate hikes in early April, and both bankers and economists said that rates would continue to rise.

But in the last week a number of banks have cut their rates by between 10 and 15 basis points, effectively undoing the last in a series of three successive rate hikes.

That’s because the situation in Europe caused investors to lap up U.S. and Canadian bonds - which are seen as a safe haven - pushing down yields, said TD economist Craig Alexander.

The yield on five-year government of Canada bonds peaked on April 21, and fell as low as 2.764 per cent on Thursday, he noted. For banks, that yield has a large impact on the cost of funding their fixed-rate five-year mortgage loans. With the cost of funds falling Toronto-Dominion Bank decided to cut its rates and, as competition kicked in, other banks began following suit.

“Greece is clearly the story here,” said CIBC economist Benjamin Tal.

“We might get another wave if markets find a reason to panic again, but the minute this situation is resolved one way or another you will see renewed upward pressure on rates,” he added. “So I see this as a blip within the context of rising rates.”

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