The Bank of Canada raised floating interest rates by 25 basis points this week, a move aimed at controlling inflation and making future borrowing more affordable. For mortgages with 20 years remaining, this hike adds about $13 per month to adjustable-rate payments per $100,000 outstanding. On fixed-payment variable-rate mortgages, the monthly payment stays the same, but roughly $21 more goes toward interest instead of principal.
The central bank expects inflation to remain around 3% in 2027, and the market is preparing for three more rate hikes next year. Several banks have already increased both prime and fixed rates, despite falling fixed funding costs. Some lenders are capitalizing on borrower panic by encouraging them to lock in rates prematurely.
For those seeking new mortgage rates, current national offers include three-year fixed rates at 4.44% (insured) and 4.64% (uninsured), five-year fixed rates at 4.44% (insured) and 4.84% (uninsured), and five-year variable rates at 3.55% (insured) and 3.90% (uninsured). Regional discounts are available, with RateBuzz offering an uninsured five-year fixed rate of 4.30% in Ontario and Alberta. Well-qualified borrowers should explore discretionary discounts from Big Six banks for conventional variable rates.
Despite the recent rate increases, floating mortgages are less risky than earlier this year when fixed rates were cheaper. However, simulations suggest fixed rates still offer a slight edge for borrowers focused on the lowest potential borrowing cost.