In the past few weeks, the cheapest five-year fixed mortgage rates jumped to the low-4-per-cent range from the high-3-per-cent range, all while the cheapest variable rates sit at 3.4 per cent.
In some cases, shoppers may find a difference of almost a percentage point between the cheapest variable and fixed rates they’re offered, Toronto-based mortgage broker Ron Butler says.
So is a variable mortgage now looking like a much better deal? Mr. Butler certainly thinks so, and that’s despite the fact that he’s among the hawks who believe that the Bank of Canada will likely raise rates by a full percentage point in 2027.
Explainer: How rising bond yields are affecting Canadian mortgages, inflation and investing
His reasoning is simple: He believes the neutral Bank of Canada interest rate – the rate it would like to keep if inflation and economic growth are at their target levels – is 2.5 per cent.
“If the Bank of Canada raises to 3.25 or 3.5, they are above their neutral rate, and this means some day they want to get back to their neutral rate,” Mr. Butler said.
“You can have a legitimate belief that there is a decent chance that the rate will go down again.”
He added that even if the Bank of Canada raises rates by one percentage point and holds them there, a consumer wouldn’t be much worse off than if they had a fixed rate.
Meanwhile, David Larock, mortgage broker and owner of Integrated Mortgage Planners in Toronto, says bond markets are currently pricing in their most negative expectations around the war in Iran and its impact on inflation. Economists agree that there could be notable decreases to fixed rates if the war ends.
By signing a fixed-rate mortgage, Mr. Larock says you’re choosing to lock into the market’s worst fears, and as a result, the highest rate.
What the trade war and U.S. policy mean for Canadian mortgage rates
The situation is even worse for U.S. consumers, where the average 30-year fixed-rate mortgage has climbed above 7 per cent for the first time since January, 2025. (30-year fixed mortgages are the standard method of lending in the U.S., unlike in Canada where borrowers typically renew every five years).
All of this should be caveated with the fact that a variable-rate mortgage should only be used by people who can accept the risk that they could take financial hits if rates rise. If the prospect of higher interest rates would keep you up at night, it may not be the right option for you.
Bond swap markets, which capture investor sentiment around Bank of Canada policy, are currently pricing in four or five rate hikes by mid-2027.
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Mortgage rates are sourced by Ratehub.ca. For a comprehensive list of today’s mortgage rates for each term/type, visit ratehub.ca/best-mortgage-rates.
Ratehub.ca is a mortgage-rate comparison marketplace and mortgage brokerage. It helps millions of Canadians compare and obtain the best mortgage rates, credit cards, insurance, deposits and loan products.
