Monday Morning Mortgage Rate Update – Canadian Fixed Mortgage Rates Are Increasing
July 14, 2025
Highlights From Last Week
Statistics Canada released our latest inflation data, for June.
Our headline consumer price index (CPI) increased from 1.7% in May to 1.9% (year-over-year) last month, and the Bank of Canada’s (BoC) most closely watched measures of core inflation held steady at around 3%. The latest data were in line with market expectation but were still too high for the Bank’s liking.
We also received the latest US inflation data, also for June.
The US inflation trends were similar to ours. Their headline CPI increased from 2.4% in May to 2.7% (year-over-year), and their core inflation increased from 2.8% in May to 2.9% last month.
The latest inflation data from both countries showed tariff-related price increases on some goods. Tariff-related price pressures are expected to broaden in the coming months as businesses deplete their pre-tariff inventories.
The Latest on Mortgage Rates
Government of Canada (GoC) bond yields continued their steady upward march last week, with most of the increase occurring on Tuesday in response to the new US and Canadian inflation data.
Lenders continued to raise their fixed mortgage rates in response, and fixed rates are likely to maintain their upward bias over the near term.
Bond market investors do not expect the BoC to cut its policy rate at its next meeting on July 30. They are now barely pricing in one more 0.25% cut in 2025.
Despite that, I continue to expect the Bank to cut by more.
Our inflation pressures should ease in the months ahead because shelter costs are cooling. They have been the primary driver of our inflation pressures throughout this cycle. I also expect our economic momentum to slow to a level where a stimulative policy rate, of 2% or less, will be required.
Insider’s Tip for Borrowers
Mortgages come with generous prepayment allowances that will allow you to dramatically reduce the time it takes to pay them off, and relatedly, your total interest cost.
A typical mortgage contract will allow you to prepay between 15% and 20% of your original mortgage balance each year. Your regularly scheduled payment can also be increased by the same amount each year. (There is no fee charged for making these extra payments).
You can learn more about prepayments in these two posts: The Power of Prepayment and The Magic of Five Percent.
Mortgage Selection Advice
My mortgage selection advice remains unchanged from last week.
Fixed rates remain below their long-term averages and the term premium, which is the additional cost that borrowers must pay to lock in for longer, is slowly being restored.
Right now, the best available three- and five-year fixed rates are roughly equal. For as long as that remains the case, I think five-year fixed rates offer better value.
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 its inherent potential for volatility and if they have the financial capacity to withstand higher costs (and, in some cases, higher payments) should my forecast prove incorrect.
If you are interested in a more detailed explanation of the rationale behind my current advice, check out this post.
Three Posts I Think Every New Visitor to My Blog 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. A lower penalty can save borrowers thousands of dollars if rates drop.
This post provides a detailed summary of the key terms and conditions to pay attention to in your mortgage contract.
