The inflation news is actually good—if you know where to look
Canada's headline inflation ticked up to 2.4% in December from 2.2% in November. But the number that matters most is moving in your favour.
Core inflation measures—CPI-trim and CPI-median, the ones the Bank of Canada watches closest—both cooled. On a three-month annualized basis, they're now running below the Bank's 2% target.
And shelter costs, which make up 30% of the Consumer Price Index, are poised to drop significantly over the next few months. Here's why: StatsCan calculates shelter costs with long lags based on historical mortgage rates and broad rental data. With fixed mortgage rates down from their highs and asking rents starting to decline in major centres like Calgary and Edmonton, lower shelter inflation is nearly baked in for mid-2026.
So why haven't mortgage rates budged?
Government of Canada bond yields are holding in a tight range, which means fixed mortgage rates are staying put for now. Variable-rate borrowers are still waiting to see what happens, with the Bank of Canada's next rate decision coming this Wednesday. No change is widely expected—but the tone of the statement could shift market expectations.
That tone matters. If the Bank signals it's more worried about sluggish economic growth, trade uncertainty, or fading consumer confidence than about lingering inflation, bond yields could dip—and that could be the spark for lower fixed mortgage rates in the coming weeks.
Don't hold your breath for deep or sudden cuts, though. Despite progress on inflation, the Bank is likely to stay cautious, at least for the first half of the year. Some market voices have even floated the idea of another rate hike down the road, though most analysts—and frankly, common sense—lean toward the next move being a cut, perhaps in the second half of 2026.
What this means for your mortgage right now
If you're buying: There's newfound breathing room to put financing conditions back into your offer. The days of 'no conditions allowed' are fading. More balanced markets across Alberta and beyond mean you're more likely to succeed with a thoughtful, protective offer that includes a firm financing clause.
If you're refinancing: Fixed rates continue to offer decent value—especially 5-year terms, which have narrowed the premium gap compared to shorter terms. But if you're betting that rates will fall by late 2026, and you're comfortable riding out some bumps along the way, variable rates might still win on long-term savings.
If you're renewing: Don't auto-renew. The gap between posted and competitive rates is wide, and every basis point matters right now. Pro tip: if you're considering a short fixed term hoping for a better rate environment in 1–2 years, weigh that against early renewal options and prepayment charges.
Financing conditions are back—and that's a good thing
Over the past decade, including a financing condition in an Offer to Purchase wasn't unusual in Alberta—but in hotter, more competitive moments, offers without conditions often had the edge. Buyers who could go in firm were typically viewed as stronger, especially when multiple offers were on the table.
Today, conditions are firmly back in the conversation. As markets balance out, financing conditions are once again a practical and strategic tool for buyers who want protection without automatically weakening their offer. The key isn't whether a financing condition is included—it's how and when it's used.
To learn how financing conditions really work, and when it may make sense to waive them, check out the related article here.
