In case you missed the latest episode of “As the Crude Barrels Turn,” the oil market is still defying gravity.
And this is important in mortgage pricing for one simple reason: because the bond market and the Bank of Canada say so.
Oil is currently the main driver of inflation, inflation is the main driver of central bank policy and bond yields, and they are the two main drivers of mortgage rates.
Fortunately, two things are working out in borrowers’ favor.
First, oil has not yet boosted underlying Canadian inflation – at least by most official measures. Average core inflation fell last month, almost reaching the Bank of Canada’s two percent target. With oil at $100, you can’t expect things to continue like this, but a win is a win.
Second, as these words are written, crude oil futures are roughly where they were on March 9, the day President Trump announced that his war on Iran was “very complete” and “very well ahead of his originally planned four- to five-week timeline.”
That was two and a half months ago, so Trump is right on schedule… by Air Canada-in-an-ice-storm standards.
All in all, if this drawn-out war doesn’t inspire confidence in your inflation outlook and you want to hold on, the news isn’t so bad. The highest fixed interest rates are only 15 to 30 basis points higher than they were at the start of the war.
There are still a handful of offers on our tariff pages that even start with a three, which also counts as a win these days.
When it comes to variable rates, falling core inflation has increased the chances that variable rate borrowers will get away with no rate hike this year. But when you hear experts say, “The Bank of Canada probably won’t raise interest rates,” remember that experts also said, “The Earth is probably flat.”
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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