The economy's slowing—but your rate hasn't budged yet
Canada's core inflation drifted lower in May, and GDP slipped by 0.1% in both April and May. That's two straight months of economic contraction—a signal the Bank of Canada can't ignore much longer. While lenders haven't responded with big changes just yet, fixed mortgage rates are now below their long-term average again, and that's giving you some room to breathe.
The bond market is calling for at least two more quarter-point rate cuts from the BoC by the end of 2025. Right now, though, the consensus is that the next cut won't come at the Bank's July 30 meeting. That means if you're on a variable rate, you'll need to hang tight a little longer. If you're eyeing a fixed rate, you've got a unique window: three-year and five-year terms are priced about the same right now.
Five-year fixed rates are starting to look like better value, especially as longer-term pricing premiums slowly reappear. But the real story is on the variable side. If you can stomach a little rate volatility and don't mind a temporary premium up front, today's variable rates may still end up being your lowest-cost option over the full term. We're not quite in stimulative territory yet—but we're inching closer.
And in case you're wondering when rates will start pushing below neutral again, history gives us some clues: the BoC has dropped its key rate to 2.00% or below in each of its last five cut cycles. With the current rate at 2.75%, we may still have a ways to go.
What this means for you
If you're buying: This is your planning window. Fixed rates are stable, and variable rates—though still at a premium—are expected to drop. But don't wait for 'perfect.' Get your pre-approval lined up now, especially if you're targeting a purchase later this summer or early fall. With economic data worsening, opportunities may open sooner than you think.
If you're renewing: Five-year fixed and three-year fixed rates are currently about the same. Unless you have specific timing goals, the five-year term may give you better value and peace of mind. But if flexibility is key, a variable could still be your long-term low-cost option—as long as you're financially buffered for short-term bumps.
If you're selling: Cooling inflation and a possible rate cut in late summer could push more buyers back into the game. Make sure your property is priced right and well-presented—buyers are cautious and selective right now.
Your mortgage isn't just about the rate
It's about the contract. The difference in penalties between lenders can add up to thousands. Before locking in, get a full breakdown of exit costs and prepayment terms. Flexibility today means freedom tomorrow.
