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Fixed rates inch upwards amid rising inflation concerns

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Nationally leading fixed rates inched up again this week, taking a few more baby steps in the wrong direction.

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The good news is, most lenders’ funding costs didn’t go up, so the pressure on fixed rates has eased a touch.

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That’s despite a big pop in oil and U.S. inflation.

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The bad news is funding costs rarely ignore inflation risk for long. And oil prices, as I type this, are ramping up again due to a certain president biting off more than he can chew.

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When it comes to mortgage terms, Canadians are still snapping up variable-rates. However, anecdotal data from Dominion Lending Centres Group, the nation’s largest mortgage originator, suggests the stampede may be slowing to a brisk trot. This month to date, 52.8 per cent of its prime borrowers chose to float, down from 57.1 per cent last month.

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Part of that is growing inflation anxiety, and the fear it could translate into a higher Bank of Canada policy rate.

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As it stands, the market doesn’t fully price in the first hike until January, with four more pencilled in through early 2028.

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But five rate hikes totalling 125 basis points is just 15 to 25 basis points more than the average difference between fixed and variable rates.

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For that price, most borrowers figure they’ll roll the dice on a more flexible variable mortgage and hope the market is right.

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