Inflation is cooling, but the Bank of Canada isn't racing to cut
Canada's CPI dropped from 2.4% to 2.2% year-over-year in October, right in line with expectations. Lower inflation usually means lower borrowing costs down the road. But the Bank of Canada isn't rushing to lower its benchmark rate just yet.
Shelter costs—especially rent—continue to drive most of the inflation pressure. Rents spiked 1.0% month-over-month and are now 5.2% higher than a year ago. That doesn't match what many landlords are seeing in Calgary, Edmonton, and Toronto, where asking rent is increasingly negotiable thanks to easing demand and a pullback in immigration. This recent rental surge is likely short-lived, and we may soon see it level off—or even reverse.
Mortgage rates have already started to ease
Variable rates haven't budged, but fixed mortgage rates have dropped from their recent highs and are hovering near their long-term averages. Just don't expect the Bank of Canada to announce a rate cut at its upcoming December 10 announcement. Recent signals from policymakers suggest they believe the current rate level is 'about right'—at least for now.
What makes this moment interesting is that the future path of inflation already has clues baked in. As those higher mortgage rates from earlier this year gradually fall off the CPI radar due to reporting lags, relief is already in the works—even before the Bank of Canada changes course again.
Fixed rates are steady; variables are still a wild card
Fixed-rate mortgages remain steady, with three- and five-year terms both offering solid value. But here's where your strategy matters: if five-year and three-year fixed rates are equal, the longer term may edge out on value thanks to better protection in a still-uncertain rate environment.
Variable-rate mortgages remain a wild card. While most insiders expect at least one more Bank of Canada rate cut eventually—likely in 2026—it'll take 'an accumulation' of further soft economic data to move the needle. So if you're considering a variable option, make sure your budget can flex if volatility flares up before rates ease again.
Not all variable rates are calculated the same way
Did you know that not all variable-rate mortgages are calculated the same way? Some use semi-annual compounding (like fixed rates), while others use monthly compounding—which actually costs you more in interest over time. Always clarify how your interest is calculated before you sign on the dotted line. It's a small detail with a big impact.
Year-end is a great time to be proactive
The end of the year can tempt you to hit pause. But in mortgage world, it's a great moment to be proactive—especially with inflation trends nudging in the right direction.
If you're unsure about locking in, floating, refinancing, or just holding tight—reach out. We're here to simplify your options and get you confidently into 2026.
