Concerned about inflationary risks? Look for these conservative mortgage options

Robert McLister: Always consult multiple sources and scrutinize contractual features; the lowest rate doesn't always equate to the lowest borrowing cost

Published Apr 03, 2025  •  2 minute read

A "for sale" sign is pictured outside a home. Photo by TYLER ANDERSON/POSTMEDIA files

Donald Trump is making low rates great again, in all the wrong ways. His potentially recession-causing tariffs are sending global bond yields on a downward spiral, and government yields are typically the number one driver of fixed mortgage rates.

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The million-dollar question is: how long will yields stay down?

Capital Economics predicts Trump’s tariff assault could drive United States inflation above four per cent this year (two per cent is the target). Canadian prices will also feel the heat as this fresh supply shock adds fuel to the inflationary fire.

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Bond investors aren’t just going to sit by and take it, recession or not.

If markets expect inflation to surge well above three per cent and medium or long-term inflation expectations balloon, rates could arc higher in a hurry.

This may not happen right away, and it may be temporary (e.g., a one-year spike), but it’s enough of a risk in the months ahead to be conservative with mortgage term selection.

I suspect we’ll see variable-rate uptake slow as a result.

The best places to hide out if you’re risk-averse remain three- and five-year fixed terms, or hybrids that are part fixed and part variable.

At present, the lowest advertised rate in Canada stands at 3.64 per cent for an insured five-year fixed mortgage, offered by Nesto and Butler Mortgage. Uninsured options are just under four per cent nationally, or as low as 3.94 per cent in Ontario from Ratebuzz.ca.

If you want a more flexible option with less long-term prepayment penalty risk, a three-year fixed can be had for as low as 3.74 to 3.89 per cent insured or 3.94 per cent uninsured.

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If you still prefer to try your luck and float your rate, nationally-advertised insured variables come in around 3.95 per cent from the likes of Pine Mortgage, Citadel Mortgage and Nesto. Again, uninsured mortgages always entail a surcharge, with variable rates currently around 4.25 per cent, give or take 10 basis points.

Remember, the devil’s in the details: Always consult multiple sources and scrutinize contractual features and restrictions, as the lowest rate doesn’t always equate to the lowest borrowing cost.

Robert McLister is a mortgage strategist, interest rate analyst and editor of MortgageLogic.news. You can follow him on X at @RobMcLister.

Mortgage rates

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