Hi, I’m Josh, a mortgage broker here in Ontario. You might have heard that the Bank of Canada hasn’t change it’s overnight rate (the one that influences variable mortgage rates) but that mortgage rates have been climbing. What’s going on?
The Bank of Canada is holding, not cutting
The Bank of Canada recently held its policy rate at 2.25%. That was expected. Normally, when the economy is slowing, the Bank would start cutting rates to support growth. We know there’s a slowdown because:
- Housing markets have softened
- Job growth has weakened
- Consumers are feeling pressure from higher costs
So naturally, many people expected rate cuts to come soon. But the Bank is hesitating. Why?
Oil prices are creating a problem
Global conflict, specifically the war in Iran, has pushed oil prices higher. When oil goes up, gas becomes more expensive, transportation costs rise, and many goods and services become more expensive. That can push inflation back up, something the Bank of Canada does not want after working so hard to bring it down.
Why fixed mortgage rates are rising anyway
The Bank of Canada controls variable rates directly through the overnight rate (also called the benchmark rate or the policy rate). But fixed mortgage rates are based on bond yields, not the Bank’s overnight rate. So what’s driving the fixed rates up?
Right now, bond markets are reacting to higher oil prices, inflation concerns, and global uncertainty. As a result, bond yields have been rising. And when bond yields go up, fixed mortgage rates usually follow.
But looking ahead, there is still uncertainty.
What this means for Ottawa homebuyers
If you’re buying a home right now, this creates a bit of a tricky decision.
Fixed rates offer stability but are currently higher than they were just weeks ago. Variable rates start lower in many cases but come with more uncertainty.
There is no one-size-fits-all answer here. It really depends on your comfort level, your budget, and how long you plan to stay in the home.
For a lot of my clients, the conversation right now is less about “which rate is lowest” and more about “which option helps you sleep at night.”
What this means for homeowners and renewals
If your mortgage is coming up for renewal, this environment matters just as much. Many homeowners were expecting rates to fall quickly. That may still happen, but it’s not guaranteed anymore.
If inflation stays under control, we could see cuts by the Bank later this year. But if oil and global risks keep pushing inflation up, the Bank may stay on hold longer than expected. Some are even speculating that we could see the rate go up.
This is why planning ahead is so important. If you wait until the last minute, you may have fewer options.
My advice as your mortgage broker
From what I’m seeing, this isn’t a normal rate cycle. We’ve got:
- A slowing economy
- Rising oil prices
- Uncertain inflation
- Markets pricing in different outcomes
If you’re trying to time the market perfectly, it’s going to be very difficult. Instead, I always recommend focusing on what you can control:
- Can you comfortably afford the payment?
- Does the mortgage fit your short- and long-term plans?
- Do you have flexibility if things change?
We’re in a tug-of-war between a weak economy and rising inflation risks. And that’s why mortgage rates aren’t behaving the way people expect.
If you’re buying, renewing, or just want help figuring out what makes the most sense for your situation, I’m always happy to walk you through it and help you create a clear plan.
