Mortgage and Market Insights

The Bank of Canada has cut rates again 0.25%, bringing the prime rate to 4.45%. Sounds good, but markets are still unpredictable: inflation is stubborn at 3%, housing markets keep starting and stopping, and interest rates are undecided.

Many Canadians feel stuck: working harder, earning less, and trying to stretch every dollar. Some of this is adjusting from the “free money” era of COVID, and some comes from deeper economic challenges. Even so, Canadians keep going.

Market snapshot:

• Unemployment: Slight increase, not alarming

• Consumer Spending: Stable

• Mortgage Arrears: Minimal change

• Stock Markets: Up 20%+ year-to-date

  
  

Generational challenges:

• Under 25: Unemployment spiked

• Ages 25–40: Higher debt-to-income ratios, lower savings

  
  

Many are tapping into savings or unsecured debt

Rates Update

What’s next for variable and adjustable rates?

Economists are split on what happens from here. Some believe this was the final cut in the cycle, while others think we might see one more modest reduction in early 2026.

There’s still an outside chance that rates could fall more sharply if the economy weakens further but the opposite could also happen. If inflation stays sticky (or rebounds), the Bank of Canada could be forced to pause or even nudge rates back up.

In short, we are at a turning point: rates are near their floor, and the next few months will tell whether this is the bottom or just a brief rest stop on a longer journey.

Fixed rates: A slightly different story

Fixed rates have been following their own path. Since early 2025, most economists have expected that fixed rates are either at or very close to their low point in this cycle. From here, they are projected to gradually rise—about 0.2% per year. Based on current trends, we likely hit the 2025 floor back in April, which could mark the bottom for this round.

One detail that doesn’t show up when you look at bond yield charts closely tied to fixed mortgage pricing is that the spread over bonds has widened. This happens when the market senses more risk, and right now that risk is being driven by tariffs, unemployment, and slower growth.

We have seen this pattern before. During COVID and the subprime crisis, for example, fixed mortgage rates sometimes rose even when bond yields dropped. We are having a smaller version of that now, with spreads up about 0.3% since the start of the year.

The good news? These spreads typically settle back down fairly quickly. So even if bond yields start climbing 6–12 months from now, that effect could be partially balanced by narrower spreads, helping keep fixed rates relatively stable in the short term.

So, fixed or variable/ adjustable rate?

Right now, variable rates have a slight edge over 3- and 5-year fixed options. They offer flexibility lower prepayment penalties and the ability to lock in anytime which can be valuable in a market that’s still finding its footing.

That said, the difference between fixed and variable isn’t huge. The best choice really depends on your comfort level, cash flow, and future plans.

Every situation is unique, so it’s worth having a quick conversation to explore what makes the most sense for you. Sometimes the right mortgage isn’t just about the lowest rate it’s about the right strategy.

Industry Updates: Clearing the air on rental income

There’s been some chatter in the market lately especially around a recent announcement from OSFI, Canada’s banking regulator that caused a bit of unnecessary panic. Let’s unpack it.

OSFI stated that lenders should not “double count” rental income when assessing borrowers with multiple mortgages. The actual quote was:

“For borrowers with multiple mortgages, the income used for the borrower income criterion should not include income used to validate the borrower’s ability to service mortgages on other properties.”

Sounds concerning at first glance, but here’s what it really means: OSFI simply wants banks to report their exposure more accurately for properties where rental income makes up more than half of the qualifying income.

In other words, this isn’t a new rule, it’s a clarification. But it does highlight a broader trend we’ve seen over the past few years: tighter rental income policies from lenders.

Here’s what it means for borrowers:

• Qualifying for rental properties is getting tougher. This trend has been building for about five years.

• Credit Unions may have more flexibility since they are provincially (not federally) regulated.

• Banks may tweak pricing on rental mortgages to offset the extra capital they now need to hold something they’ve done before, but with a new reason this time around.

  
  

So, while the headlines made it sound like a major rule change, it’s really more of an adjustment behind the scenes one that most borrowers will only notice in subtle ways.

Market trends we are watching

We are also noticing a few interesting trends in the mortgage market right now:

• Net-worth programs are more common: With stricter qualifying rules, many of our clients are applying through net-worth programs to secure financing. These programs can open doors when traditional qualifications are challenging.

• Pre-sale market challenges: The pre-sale market continues to face hurdles. If you are closing on a pre-sale in the next couple of years, it’s important to reach out soon we can help you explore strategies to prepare for completion and avoid surprises.

• Payment-optional mortgages are on the rise: Products like reverse mortgages are seeing significant growth. Some major providers have reported roughly 40% growth over the past two years, highlighting a shift in how Canadians are thinking about retirement and cash flow flexibility.

  
  

These trends show that while the market has its challenges, there are creative solutions available if you know where to look.

Mortgages don’t have to be complicated. With the right guidance and support, the process can be straightforward and stress-free.