A home for sale in Toronto in 2021. Mortgage analysts say the war in the Middle East is the single biggest factor affecting the direction of mortgage rates.Carlos Osorio/Reuters
Choosing between a fixed and variable mortgage is difficult at the best of times. But now that fixed mortgage rates are swinging wildly and expectations around Bank of Canada rate decisions are changing, Canadians looking to buy a home or renew their mortgage face additional challenges.
In recent weeks, the lowest fixed rates have climbed by roughly 40 basis points to the 4-per-cent mark, as bond yields spiked in reaction to inflation concerns from the war in Iran. (Lenders generally base fixed mortgage rates on the performance of the bond market.)
As a result, the cheapest variable rate mortgages are roughly 70 basis points lower than the cheapest fixed rate, with the lowest advertised five-year variable rate at 3.35 per cent.
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It’s a wide enough gap that Clay Jarvis, a mortgage expert with NerdWallet, said in an interview that some buyers might end up opting for a variable rate simply because it is easier to qualify for one right now.
Markets are also changing their expectations of how many times the Bank of Canada may hike rates this year. Bond swaps markets are currently expecting one or two rate hikes by the end of 2026, and that’s a notable change from last week when markets were predicting three hikes.
A major reason for the change is the ceasefire enacted between the U.S. and Iran, which could bring relief to surging oil prices.
Mortgage analysts have said the war in the Middle East is the single biggest factor affecting the direction of mortgage rates. Variable rates might be the better deal right now, but they’re only recommended for people who can live with their risk of volatility, especially with unpredictable U.S. government policy.
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.
Rates shown are the lowest available for each term/type and category (insured versus uninsured) as of market close on Thursday.
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