For mortgage rates, it’s the calm before the Bank of Canada storm

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Millicent Wong
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Leading mortgage rates have gone into hibernation. Not a single interest rate from a leading national lender has changed after last week's increase. This is as rare as a comfortable seat on a budget airline.

The calm could end next week when the Bank of Canada takes out the chainsaw and cuts interest rates on Wednesday. In the meantime, variable rates continue to be the best value, if the bond market outlook is anything to go by. Derivatives traders are pricing in another 175 basis points of rate cuts from the Bank of Canada by 2025, according to forward rate data from CanDeal DNA.

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Despite this forecast, only one in 10 mortgage buyers chose a variable rate in August, the most recent month for which data is available. With September's cut coming on top of this month's cut, we can expect even more people to jump on the bandwagon and bet on a steady decline in the key rate.

In the fixed-rate space, three-year mortgages in the mid-four percent range continue to be the hottest commodity.

With all interest rate cuts priced in, short-term fixed rates would normally be attractive in this environment, but lenders are stingy.

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Take the one-year fixed price for example. The maximum advertised rate a year ago was 6.79 percent (uninsured); Now it's 5.99 percent, just 80 basis points less. Compare that to the 204 basis point drop in one-year yields since the October 2023 peak.

Apparently banks are in no mood to do business with borrowers who only commit for 12 months.

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

Mortgage interest rates

The interest rates shown below are updated at the end of each day and come from MortgageLogic.news' Canadian Mortgage Rate Survey. Postmedia and imagination. Online Inc., parent company of MortgageLogic.news, will be compensated by certain mortgage providers if you click on their links in the charts.

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