Fixed Rates: Caught in a Tug-of-War
It's easy to believe mortgage rates are on the way down. Inflation is easing, the economy is cooling, and there's talk of future Bank of Canada cuts. But before you lock into that mindset, ask yourself: what if the market's expectations are off?
On June 4th, the Bank of Canada held firm at 4.75%, resisting pressure to cut. That pause alone sent a signal: the central bank isn't ready to declare victory over inflation just yet. At the same time, Government of Canada bond yields—which drive your fixed mortgage rate—showed signs of holding their ground or even pushing slightly higher.
That might feel surprising, especially since recent U.S. inflation data came in cooler than expected. Normally, that would pull bond yields—and fixed rates—down. But not this time. Yields dipped briefly, then rebounded by week's end. That kind of reaction tells us something: investors aren't convinced rate cuts are a sure thing anymore.
What's Holding Rates Up?
Behind the scenes, inflation risk is still very real. Governments in both Canada and the U.S. are planning significant spending increases, which could heat things up again. Meanwhile, tariffs and geopolitical tensions are adding fuel to the fire, even if the impact hasn't hit yet.
Here's the kicker: even when geopolitical events—like last week's Middle East flare-up—might normally send investors racing to the safety of bonds, they didn't. The fact that bond yields barely moved suggests there's a floor forming under rates, limiting how far they can fall.
Variable vs. Fixed: Choose Wisely
With the Bank of Canada holding steady, variable rate mortgages didn't budge last week. The market still expects some cuts later this year—possibly in the fall—but those hopes now come with a bit more caution.
Fixed mortgage rates, on the other hand, may not fall as quickly as you hoped. In fact, if bond yields continue to firm, we could even see small increases in fixed rates over the summer.
So, what's the right move? That depends on your comfort with risk, your timeline, and whether you value payment stability or long-term flexibility. There's no one-size-fits-all answer—but there is always a smart strategy for your situation.
Don't Chase the Perfect Rate—Build the Perfect Plan
Focus on your goals and create a mortgage strategy that works in any rate environment. That's how you stay ahead—no matter what the market throws your way.
If you're purchasing, refinancing, or renewing your mortgage, [contact Matt](mailto:matt@hellomortgage.ca) or apply for a Mortgage Check-up to get the best available rates and terms for your situation.
