Third straight month of job losses...

The economy lost jobs again

October was supposed to add about fourteen thousand jobs. Instead the country lost them, unemployment ticked up to 6.7%, and that makes three months in a row of going backwards. Alberta took it hardest: 24,000 jobs gone last month, unemployment is now sitting at 7.3%.

The story everyone was telling about a strong economy is looking shaky.

The people setting fixed mortgage rates took one look at the weak data and decided fewer hikes are coming. The bond yield rate lenders borrow at to fund five-year fixed loans has slipped to 3.36%. When that falls, fixed rates usually follow close behind, and the best uninsured five-year fixed has already eased from 4.69% to 4.59%.

Fewer hikes expected, and that's why fixed is softening

Right after the late-October hike, economists were betting on four more quarter-point increases over the next couple of years. The weak jobs report brought that back down to three. The odds of a January increase fell from near-certain to about 75%.

Fewer hikes expected means bond yields come down. That's exactly why more fixed-rate cuts are likely close. If you're buying or renewing and you've been watching fixed rates, the pressure right now is pointing down, not up.

That's a nicer backdrop to make an offer in than we've had in a while.

Wages are falling behind inflation

Paycheques grew just 2.2% over the past year, down from 2.3%. Inflation is running at 3.1%. So the average Canadian's paycheque is buying a little less than it did a year ago. Nobody celebrates that.

But it changes the math in your favour. When workers can't absorb higher prices, businesses can't pass their rising costs through without losing sales. So many are eating the cost instead. That's the opposite of the wage-and-price spiral everyone keeps worrying about.

The quieter that worry gets, the less reason there is for rates to keep climbing. The case for hiking hard just got weaker, and the people setting fixed rates noticed.

Variable would have to rise a full percent to lose to fixed

The two are moving from different engines right now. Variable moved up with the late-October hike. Fixed is lining up to fall as fewer hikes are expected. They're moving in opposite directions, so rates aren't one thing this week. It depends which one you pick.

The best insured five-year variable sits at 3.65% today. The best insured five-year fixed is 4.44%. That gap is nearly a full percent. For variable to end up costing you more than fixed over five years, variable rates would have to climb a full 1.00% from here and stay there.

My own read is that we see a couple of small hikes over the next year, not a full point. So the variable borrower keeps the cheaper rate and gets to benefit right away if prime ever cuts.

The catch is honest: a variable payment can move, and you need the room in your monthly budget to ride that out. If a payment that doesn't flinch lets you sleep at night, fixed is worth the cost. That's a comfort decision as much as a money one. Pick the payment you can forget about.

My take

I still lean variable, and the past two weeks only firmed that up. For variable to lose to fixed, rates would need to climb a full percent and hold, and I don't see that in an economy shedding jobs three months running. My honest caveat: I'm wrong if energy prices spike again and actually push into everything else. Then hikes keep coming and fixed buyers look smart. But the data's pointing the other way, and a variable borrower pockets any cut the moment it happens instead of waiting for renewal.

Insider tip

If you're on a variable with a fixed payment, call your lender this week and ask for your trigger rate. That's the point where more of your payment goes to interest than principal. It's a two-minute question that tells you exactly how much room you have before a hike forces your payment up, so nothing catches you off guard on the next statement.

Go deeper: How to Actually Manage Your Mortgage (Without the Stress)