Canadian lenders have hiked fixed mortgage rates significantly since mid-March.Justin Tang/The Canadian Press
Oil prices aren’t the only thing on an upward trajectory these days – fixed mortgage rates look much less appealing than they did a month ago.
Canadian lenders have hiked fixed mortgage rates significantly since mid-March, tacking on between 30 and 40 basis points to both their discounted and posted offers. The lowest insured five-year fixed mortgage rate on Ratehub.ca has risen to 4.09 per cent from 3.79 per cent at the start of March.
For a borrower with a $500,000 mortgage, this higher rate translates into $80 paid more a month, and $7,064 more in total interest by the end of a five-year term.
And it’s unlikely lenders are finished hiking; bond yields – which lenders use to set the pricing floor for fixed borrowing products – remain firmly elevated in the wake of the continuing war in Iran.
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Bond investors have been steadily selling off their holdings as the soaring price of oil threatens to reheat inflation, while also wiping out the chance of central bank rate cuts in 2026. Higher inflation and tight monetary policy devalue bonds, and the fact that yields are rising indicates investors expect both to occur in the coming months.
The five-year Government of Canada bond yield, which largely underpins the pricing for five-year fixed mortgage terms, has remained above 3.1 per cent since March 18 although it did dip below that on Thursday to 3.08 per cent. For context, the last time yields were this high was in July, 2025, when markets were experiencing tariff-induced whiplash.
This will likely remain the case as long as the war in Iran continues and the Strait of Hormuz remains closed. Contradictory comments from U.S. President Donald Trump don’t help – yields have surged alongside fears that the war will be prolonged, despite Mr. Trump’s suggested two-to-three-week timeline to end the conflict.
When fixed-rate mortgages get more expensive, borrowers often turn to variable-rate options, assuming they’re better priced – and today’s lowest five-year variable rate is considerably more attractive, at 3.35 per cent. That’s a whopping spread of 74 basis points between the two rate types – a gap in pricing not seen since the fall of 2022.
Already, there’s evidence today’s borrowers are going variable. By the end of March, they made up more than 30 per cent of all deals on Ratehub, compared with 19 per cent at the end of December last year.
It’s not hard to rationalize: A mortgage at 3.35 per cent would result in $196 saved each month, compared with locking in at 4.09 per cent. But choosing a variable rate comes with its own risks.
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The same inflation factors scaring bond investors also set the stage for central bank rate hikes. While the Bank of Canada’s governing council maintained in their summary of deliberations published on April 1 that it’s “too early” to react to war-induced rising energy prices, they’ll need to hike rates eventually if inflation moves beyond oil and contaminates other consumer spending categories.
Currently, it would take three 25-basis-point rate hikes from the BoC to close the gap between fixed and variable mortgage prices – but that’s still a risk variable borrowers need to consider. It’s crucial that anyone taking out a floating rate has the risk tolerance and budget padding to absorb potentially higher payments.
Variable-rate borrowers should also have an exit strategy, in case the Bank of Canada does hike rates at a faster-than-expected clip. A benefit of variable rates is that they’re much cheaper to break mid-term than fixed, costing a penalty of three months of interest.
Many lenders also allow variable borrowers to convert to one of their fixed rates at no charge – but these aren’t likely to be the best market rates. Nevertheless, it does provide an out if fixed rates do drop suddenly during your term, or the heat rises too fast on your floating rate.
Finally, a word of caution for today’s rate shopper: With rates of all types facing upward pressure, you can’t afford to delay your decision. Submitting an application now, and securing a preapproval with a rate hold will protect you from any imminent price increases for up to 120 days.
Should rates dip during that time frame, you’ll still have access to those best deals. It’s a small measure of stability, as these unprecedented times roll.
What do you want to know about mortgages?
Do you have a mortgage question for our expert? Is a variable or fixed rate the best option? Does it make financial sense to refinance? Is it better to consult your bank or go to a mortgage broker?
Submit your questions below and Ratehub's Penelope Graham could answer it in an upcoming column.
Penelope Graham is the head of content at Ratehub.ca
