The scales have tipped in favor of variable mortgage rates

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One week into the Bank of Canada’s new rate cut cycle, bond yields are falling like an Olympic diver without a splash. The loss stems from growing confidence that North American inflation will ease back to the two percent level preferred by the Bank of Canada and the United States Federal Reserve.

And will. Central banks always win.

In fact, there will come a time perhaps next year when mortgage borrowers will say to themselves: Here I am, stuck in order, while that variable rate peak was as visible as a comb in the wind strong.

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But that’s life. The reflection is inevitable. So it’s the fact that you look at the economic data over the next year that makes everyone guess the loss of inflation.

And to be clear, the 200 basis points of rate cuts the market is pricing in for the next 32 months, according to future rates tracked by CandDeal DNA are far from certain. For that reason, I’d be the last to call someone crazy for not navigating their mortgage.

What we can say is that, despite all the risks, the scales are tipped in favor of the variables. This is true for all sorts of reasons, including the rate carry trend after the first Bank of Canada rate cut, the downward momentum of inflation, the rising momentum of unemployment, future implied rates in the bond market , the inverted yield curve, academic research and the variable rate prepayment advantage (most variable rates allow you to close at any time, or get out early with only a three month interest penalty).

Meanwhile, the spread between nationally advertised prime unsecured (6.10 percent) and fixed (5.14 percent) has narrowed to 96 bps. This is the smallest advance in the fixed-term rate since last fall.

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However, if we take a leaf out of the rate cycle history book, fixed rates are set to fall even further. This current dip in bond yields could bring more fixed-rate savings this weekend.

Oh, and if you’re coming up for renewal, don’t just go through with 44 percent of Canadians and accept whatever rate your lender offers, as a survey by Mortgage Professionals of Canada just found.

Recommended by the Editorial

Instead, pit your lenders against the cream of the crop nationwide.

If you’re well-qualified and find a lender or broker that saves you at least some goodies or offers superior mortgage features or advice, don’t be afraid to let your old lender eat your dust. In today’s digital mortgage age, applying online, uploading a few documents, and closing doesn’t take long.

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

Want to know more about the mortgage market? Read Robert McListers new weekly column in the Financial Post for the latest trends and details on funding opportunities you don’t want to miss.

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Mortgage rates

The rates shown below are updated by the end of each day and are taken from the Canadian Mortgage Rate Survey, produced by Postmedia and Imaginary. Online Inc., parent of, is compensated by some mortgage providers when you click on their links in the charts.

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