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Canada’s economy bounced back this spring. New StatCan data released Friday suggest second-quarter growth near 3.4 per cent annualized, well above the Bank of Canada‘s forecast.
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Still, temporary boosts (oil market quirks, the Census, the World Cup) and renewed U.S. tariff threats have economists expecting no Bank of Canada rate changes through 2026.
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Markets disagree, pricing a 70 per cent chance the first central bank rate hike lands by December.
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Either way, none of this is doing anything to stop borrowers from playing variable-rate roulette.
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Anecdotal numbers from Canada’s biggest mortgage originator, Dominion Lending Centres Inc., show 54 per cent of prime mortgage borrowers opting for a floating rate in July.
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The attraction is not exactly mysterious:
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- The lowest variable rates (3.40 per cent or less if insured or 3.70 or less if uninsured) are now more than a half percentage point below the lowest fixed rates.
- Economists predict no Bank of Canada hikes for several months (for what that’s worth).
- Average core inflation is just 1.85 per cent, below the two per cent target, despite inflationary oil prices, tariffs and AI investment.
- Variables let you lock in at will.
- Breaking one costs just three months’ interest — cheap as far as penalties go.
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All of this may well be a precursor to Bank of Canada hikes by year-end or in 2027, so risk-averse borrowers should at least weigh a fixed rate or hybrid mortgage (half fixed and half variable), especially if they can find one near or below four per cent.
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Fixed deals may get scarcer, however, with the five-year bond yield now creeping toward a two-year high.
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Robert McLister is a mortgage strategist, interest rate analyst and editor of MortgageLogic.news. You can follow him on X at @RobMcLister.
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For the best national insured and uninsured mortgage rates, updated daily, please visit our mortgage rate page here.
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