Was Last Week’s Bond-Market Reaction a Warning for Our Mortgage Rates?
June 16, 2025
Monday Morning Mortgage Rate Update
June 30, 2025
My Monday Morning Mortgage Rate Updates will be offered in a revised format going forward.
Each regular post will feature the following sections: Mortgage Advice for Now, The Bottom Line, and an updated Rate Chart.
There will also be an addendum, with some my key blog posts that I think every Canadian mortgage borrower will benefit from reading. I may also provide more detailed posts on a one-off basis if circumstances warrant.
I want to assure you that the economic analysis that underpins everything I say about mortgages remains as robust as ever. The changes are only in the details I communicate.
Reminder that you can subscribe to this blog (for example, at the top of my main Blog Page) to have my posts sent directly to your inbox to ensure that you don’t miss any.
Mortgage Advice for Now
Fixed rates are now back below their long-term averages. The rate premium that borrowers have historically had to pay for longer terms is also slowly being restored. For now, today’s best available three- and five-year fixed rates are roughly equal. I think five-year fixed rates offer better value for as long as that is the case.
I continue to believe that today’s variable mortgage rates will likely produce the lowest borrowing cost over their full term. But these are volatile times. Anyone choosing a variable rate should do so only if they can live with their inherent potential for volatility and if they have the financial capacity to withstand higher payments if my forecast proves incorrect.
If you are interested in a more detailed explanation of the rationale behind my current mortgage-selection advice, check out this post.
The Bottom Line
Government of Canada bond yields dropped a little last week. It will be interesting to see if they fall further this week in response to the US decision to bomb Iran.
Normally an action of that magnitude would cause investors to rush to the safety of sovereign bonds, triggering a sharp drop in yields that puts downward pressure on our fixed mortgage rates.
If the bond market’s reaction is more muted this time, that will provide further confirmation that inflation concerns have put a floor under bond yields and our fixed mortgage rates at around their current levels.
Bond-market investors continue to expect the Bank of Canada to enact two more 0.25% rate cuts over the remainder of 2025. But our core inflation measures have been heating up of late. The Bank has noted its concern about that trend.
We will receive the latest inflation data, for May, from Statistics Canada tomorrow. That should give us a better idea of how long variable-rate borrowers will likely have to wait for their next rate reduction.
Three Posts That I Think Every Canadian Mortgage Borrower Should Read
This post provides a detailed comparison of the pros and cons of fixed- and variable-rate mortgages.
This post provides a detailed breakdown of the different ways that lenders calculate their fixed-rate mortgage penalties. The amounts charged can vary significantly, and a lower penalty can save borrowers thousands of dollars if rates drop.
This post provides a detailed summary of all the key terms and conditions to pay attention to in your mortgage contract.