Mortgages and Market Insights: Rates, renewals and what’s changing?

It has been another interesting few months in the markets. Between trade uncertainty, geopolitical tensions, changing bond yields and a Canadian economy that continues to surprise in some areas, there is certainly no shortage of headlines.

But underneath all the noise, there are some important trends emerging for homeowners, buyers and investors.

The biggest question I’m hearing is:

Where are rates headed and what should I be doing about my mortgage?

Let’s take a look at what we are seeing.

Global events, local impact

The CUSMA negotiations have once again reminded us just how quickly global events can affect Canadian mortgages.

On August 21st, trade negotiations between Canada and the U.S. broke down, followed almost immediately by the announcement of significant new U.S. tariffs on Canadian goods.

The challenge for Canada is that tariffs can create two very different economic outcomes.

On one side, tariffs are inflationary. Higher costs for businesses can eventually make their way to consumers, making it more difficult for the Bank of Canada to bring inflation back toward its 2% target.

On the other hand, tariffs can slow the economy, reduce investment and lead to job losses. A weaker economy could put pressure on the Bank of Canada to keep rates lower or potentially cut them.

That leaves us in an unusual position: inflation could push rates higher, while a weaker economy could push them lower.

Nobody knows exactly which force will win, and that is why trying to predict the next rate move has become increasingly difficult.

Canadian economy: stronger than expected, but still uneven

There is some good news in the Canadian economic data.

The Canadian economy grew 3.3% in second quarter, following an upwardly revised 0.3% in first quarter.

The recovery was also relatively broad:

• Consumer spending improved

• Housing activity rebounded after several weak quarters

• Exports increased

• Business investment strengthened

• Unemployment edged down to 6.4% in July

At the same time, the Bank of Canada continues to see excess capacity in the economy, meaning there is still some weakness underneath the headline numbers.

Inflation is also something we need to keep watching.

Headline CPI has been hovering around 3%, largely because of higher gasoline prices. The encouraging part is that inflation excluding gasoline was closer to 2.2%, and core inflation measures remained close to the Bank's target.

The problem is what happens next.

Higher energy prices, tariffs and geopolitical uncertainty could all create additional inflationary pressure.

Bank of Canada: rates stay at 2.25%

The Bank of Canada once again held its policy rate at 2.25%, where it has remained since October 2025.

This was widely expected.

The Bank is essentially balancing two competing risks: Inflation is still a concern. But at the same time, the economy isn't strong enough to make significant rate increases an easy decision.

The Bank has also made it clear that it is prepared to respond if the economic outlook changes. For now, however, we remain in a relatively stable environment.

Rate outlook: what we are seeing now

Variable/adjustable rates:

Variable/adjustable rates are in an interesting position.

Earlier in the year, the expectation was that there could still be room for rate cuts. That view has changed considerably.

Markets are now pricing in the possibility of rate increases over the next couple of years, although that outlook could change quickly if we see meaningful deterioration in employment or economic growth.

• Short term: Rates are likely to remain relatively stable.

• Medium term: There is increasing risk of upward movement, although much will depend on inflation, employment and how the trade situation develops.

• Long term: There continues to be a bias toward gradually higher rates as inflationary pressures and the long-term neutral rate work their way through the economy.

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The important takeaway is that variable/adjustable rates are no longer the obvious “wait for the next cut” strategy they appeared to be earlier in the cycle. That doesn't mean variable is wrong. It simply means the decision needs to be based on the numbers, your risk tolerance and how much flexibility you value.

Fixed rates:

Fixed rates are telling a slightly different story.

Bond yields have been volatile, particularly as markets react to geopolitical events, tariffs and changing expectations around inflation.

The 5-year Government of Canada bond yield has been pushing toward the 3% level, which is important because fixed mortgage pricing is closely tied to the bond market.

We have already seen lenders adjust fixed mortgage rates upward.

At the same time, the bond market has been moving in both directions, which means there may still be opportunities for borrowers who are watching closely.

• Short term: Some upward pressure, but volatility could continue.

• Medium term: Rates are more likely to experience gradual increases than significant declines.

• Long term: The expectation remains for fixed rates to gradually move higher, potentially around 0.20% or more per year, depending on inflation and economic conditions.

So, while we don't expect rates to suddenly skyrocket, the direction over the longer term is something borrowers should pay attention to.

The rate market is continuing to move back and forth depending on what happens with CUSMA, energy prices and global events. A positive development on the trade or geopolitical front could bring some relief to bond yields. On the other hand, continued uncertainty could push yields and fixed mortgage rates higher.

Current forecasts are suggesting that rates could be approximately 0.70% higher over the next 12 months, although timing is impossible to predict. That is why the question isn't necessarily:

“Will rates go lower?”

It is: “What happens to me if they don't?”

If you have a renewal approaching, this is a good time to understand your options and determine whether a rate hold or early mortgage review makes sense.

Fixed or variable/adjustable rate?

Right now, the 3-year and 5-year fixed options are relatively close, assuming the rate difference is around 0.20%.

Variable/adjustable rates are trailing somewhat on the projected five-year cost, although they continue to offer two important advantages:

• Greater flexibility

• Generally lower penalties if you need to break the mortgage

For example, on a $500,000 mortgage, the projected difference between options could be around $3,000 over five years based on current assumptions.

That's meaningful but it doesn't automatically make one option right for everyone.

For some borrowers, the flexibility of variable/adjustable is worth the premium.

For others, locking in today's fixed rate provides something equally valuable: certainty.

In this market, we are seeing more borrowers lean toward the fixed side not because variable/adjustable is necessarily a bad choice, but because some are simply choosing to reduce their exposure to future rate increases.

Mortgage trends we are watching:

There are several other developments worth paying attention to.

• Renewals are becoming more strategic

One of the biggest changes we are seeing isn't necessarily the rate itself it's how homeowners are approaching their renewals.

Some lenders are offering very competitive renewal rates because retaining an existing client is often less expensive than finding a new one.

Others are not as competitive.

That means a renewal offer shouldn't automatically be treated as the final answer.

A renewal is an opportunity to ask:

• Does my current mortgage still fit my plans?

• Could I improve my cash flow?

• Do I need more flexibility?

• Are the penalties and pre-payment privileges appropriate?

• Am I likely to need additional financing in the next few years?

Sometimes the best strategy is to stay exactly where you are. Sometimes there is a better option available. The important thing is knowing the difference.

• More homeowners are reviewing their mortgages early

We are also seeing more homeowners start conversations well before their renewal date.

With uncertainty around where rates are heading, planning early can create more choices.

Depending on your circumstances, that could include:

• Securing a rate hold

• Reviewing an early renewal

• Refinancing

• Restructuring debt

• Moving to a different mortgage product

It doesn't mean you have to make a change. It simply means you are making the decision with more information and fewer surprises.

• Reverse mortgages continue to grow

Reverse mortgages continue to see strong growth, with balances increasing by roughly 25%–30% annually.

We are seeing more homeowners look at these mortgages as part of broader retirement and cash-flow planning not simply as a last resort.

For some homeowners, accessing equity can provide greater financial flexibility without having to sell the home they want to remain in.

• Private lending remains selective

Private lending continues to tighten.

Land financing has become particularly challenging, and some private lenders have reduced or stopped lending on certain condominium projects.

This makes understanding the lending landscape increasingly important, particularly for investors, developers and borrowers with more complex financing needs.

• Consumer debt: another number worth watching

There is another trend happening quietly in the background. Canadian consumer debt has now surpassed $2.6 trillion.

Both Equifax and TransUnion are reporting that Canadians are carrying larger balances, and more borrowers are beginning to fall behind on payments.

Mortgage delinquency rates remain relatively low overall, but 60+ day delinquencies have edged higher, particularly in more expensive markets where homeowners tend to carry larger mortgages.

This is something I will continue watching closely. The housing market doesn't operate in isolation.

When household debt rises, purchasing power eventually gets squeezed and that affects everything from consumer spending to housing demand.

Looking ahead

There are no perfect signals in today's market. Rates have stabilized, but they can move. Housing prices have adjusted significantly, but some markets, particularly condos may still have further to go.

The economy has strengthened, but trade and geopolitical uncertainty remain significant risks.

And borrowers are facing very different circumstances depending on whether they are buying, renewing, refinancing or carrying investment properties.

That's why I don't believe the answer is simply “wait” or “act now.”

The better question is: What makes sense for you given where you are today and where you want to be in the next few years?

A simple next step

If you would like some clarity around your mortgage, I'm happy to do a quick, no-obligation review. You can send me your latest mortgage statement.

We can look at:

• Your current mortgage and rate

• Renewal options

• Potential savings

• Fixed versus variable/adjustable

• Early renewal or refinance possibilities

• Your future borrowing needs

Sometimes the answer will be to stay exactly where you are. Sometimes there will be an opportunity worth exploring. Either way, you will have a better understanding of your options and a strategy for what comes next.

Markets will continue to change. Your mortgage strategy should change with them.