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Oil is back above the magic number — $100 per barrel — and rate markets are not applauding.
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With both major crude benchmarks (WTI and Brent) above the century mark, central banks are growing anxious that higher energy costs will leak into other goods and services.
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That inflationary vibe is propping up bond yields, which steer fixed rates, and central-bank hike odds, which variable-rate borrowers should be eyeing the way a gazelle eyes tall grass.
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As this is being written, market-implied odds of a Bank of Canada hike next Wednesday sit at 78 per cent.
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Floating-rate borrowers, in other words, should brace for impact.
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If that hike does land, the Bank of Canada will likely hint there’s more where that came from. That should cool some appetite for variables, which have been more popular than they should be given the forward rate outlook.
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As for terms, the three-year fixed is the pick of the litter for most conventional borrowers, given its balance between medium-term rate security, upfront cost and flexibility.
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On the insured side, the cheaper five-year fixed models out better — relative to the forward rate outlook.
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Nationally-advertised rates three-years start at 4.39 per cent for insured mortgages and 4.59 per cent for uninsured.
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Right now, that’s 109 and 95 basis points more, respectively, than a variable will cost you.
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Give it a week, though, and that edge likely shrinks by 25 basis points, assuming bond traders have read the tea leaves correctly.
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And if the forward market is right (a non-trivial assumption), our central bank will have wiped out the variable-rate edge entirely by the end of next year.
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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.
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For the best national insured and uninsured mortgage rates, updated daily, please visit our mortgage rate page here.
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