Houses for sale in Ottawa

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One week into the new Bank of Canada rate cut cycle, bond yields are plunging like an Olympic diver without a splash. The nosedive stems from growing belief that North American inflation will settle back down to the two per cent mark beloved by the Bank of Canada and the United States Federal Reserve.

And it will. Central banks always win.

In fact, there will come a time — probably next year — when mortgage borrowers say to themselves, “Here I am, stuck in fixed, while that variable rate peak was as obvious as a comb-over in a strong breeze.”

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But that’s life. Hindsight is inevitable. So is the fact we’ll see economic data over the next year that makes everyone second guess inflation’s defeat.

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

What we can say is that, despite all the risks, the scales have tipped in variable’s favour. That’s true for all sorts of reasons including the tendency of rate carry-through after the first Bank of Canada rate cut, the downward momentum of inflation, the upward momentum of unemployment, implied forward rates in the bond market, the inverted yield curve, academic research and the variable-rate prepayment advantage (most variable rates let you lock in anytime, or get out early with just a three month interest penalty).

Meanwhile, the difference between the leading uninsured nationally advertised variable (6.10 per cent) and fixed (5.14 per cent) has shrunk to 96 bps. That’s the smallest rate advantage for fixed terms since last fall.

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However, if we take a leaf from the book of rate cycle history, fixed rates are set to tumble even more. This current plunge in bond yields could bring more fixed-rates savings as soon as this weekend.

Oh, and if you’re coming up for renewal, don’t just roll over like 44 per cent of Canadians and accept whatever rate your lender offers, as a Mortgage Professionals Canada survey just found.

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Instead, pit your lender’s offer against the cream of the crop nationwide.

If you’re well qualified and find a lender or broker that saves you at least a few grand — or gets you superior mortgage features or advice — don’t be afraid to leave your old lender eating your dust. In today’s digital mortgage era, applying online, uploading a few documents and closing really isn’t that time consuming.

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 McLister’s new weekly column in the Financial Post for the latest trends and details on financing opportunities you won’t want to miss. 

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Mortgage rates

The rates displayed below are updated by the end of each day and are sourced from the Canadian Mortgage Rate Survey produced by Postmedia and Imaginative. Online Inc., parent of, are compensated by certain mortgage providers when you click on their links in the charts.

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