Current Market Trends – Interest Rates
The most recent Bank of Canada announcement brought no change to the overnight rate, which is currently 2.75%. The prime rate sits at 4.95%.
The general consensus going forward is still mixed — some expect more cuts later this year, while others think the Bank may pause to see how the economy reacts to recent changes.
Fixed vs. variable – why they don’t always move together
Fixed mortgage rates aren’t tied directly to the Bank of Canada’s rate. Instead, they’re based on Canada bond yields, which are influenced by things like inflation expectations, global economic conditions, and investor demand. That means bond yields — and therefore fixed mortgage rates — can move in the opposite direction of the overnight rate.
Here’s a comparison to show how differently they move:
The overnight and prime rates have dropped significantly since mid-2023, but 5-year fixed rates have only moved down about 0.65%. This is because bond yields — not the Bank of Canada — dictate where fixed rates go.
Why timing the market is tricky
Trying to plan a purchase solely around where you think rates will go can backfire. Even the major economists at the big banks don’t fully agree on what’s coming next. You might wait for another rate cut, only to see fixed rates climb if bond yields rise.
If you’re financially ready, comfortable with the payments, and it’s for a home you want, then buying now isn’t a wrong choice — no matter what the next rate announcement brings.
[Click here to find out what your payments would look like]