As a mortgage broker working closely with clients across Canada, I’m seeing a trend that’s reshaping the landscape: fixed-rate mortgages are on trending higher.
While many Canadians have traditionally favoured fixed rates for their predictability, the recent climb in rates has raised important questions for anyone considering a home purchase, renewal, or refinance.
Let’s break down why this is happening and what it means for you.
Why Are Fixed Mortgage Rates Rising?
Fixed mortgage rates in Canada are closely tied to bond yields, particularly the Government of Canada’s 5-year bond. Over the past year, bond yields have moved higher due to several factors:
- Sticky inflation → Inflation remains above the Bank of Canada’s 2% target, even as rate hikes aim to cool the economy.
- Global uncertainty → U.S. economic data, geopolitical tensions, and central bank decisions abroad are pushing investors toward higher yields. The U.S economy has a large impact on the Bank of Canadian's finance decision because our economies are so tightly intertwined.
- Reduced rate-cut expectations → Just a few months ago, many anticipated the Bank of Canada would start cutting rates in 2024. Now, that timeline has been pushed further out, reducing downward pressure on fixed rates.
Here is the link to the Bank of Canada's rate decision history. As of June 6th writing this article, you'll see that the Bank of Canada decided to stay put. There was no increase or decrease in the over night rate.
As a result, lenders are pricing in higher costs of borrowing — and passing them on to borrowers.
What Does This Mean for Homebuyers and Homeowners?
For homebuyers, higher fixed rates mean increased monthly payments and reduced borrowing power. If you were pre-approved at, say, 3.99% a few months ago, you may now be looking at 4.20% or higher — cutting into what you can afford.
For current homeowners approaching renewal, it’s a wake-up call. Many Canadians who locked in at ultra-low rates during the pandemic (sometimes below 2%) are now facing renewals at more than double those rates.
Example:
- $500,000 mortgage at 2% fixed → ~$2,120/month
- $500,000 mortgage at 5.5% fixed → ~$3,070/month
That’s nearly a $1,000 monthly jump — a significant hit to household budgets.
Should You Still Go Fixed?
Despite rising costs, many Canadians are still gravitating toward fixed rates because they offer certainty.
In a volatile market, locking in today’s rate — even if it’s higher — gives peace of mind that your payment won’t change if rates rise further. Additionally, variable rate mortgage are still initially higher than fixed rates at this time. Lenders do this to incentivize borrowers to pick a fixed rate over the variable, and even the lenders don't know where rates will be in a few months or years.
But it’s not one-size-fits-all.
Here’s what I recommend:
✅ First-time buyers or tight budgets → A fixed rate may help you sleep at night, even at a premium.
✅ Short-term homeowners (planning to sell/move soon) → A variable or shorter-term fixed rate might give you flexibility. The maximum penalty to get out of a variable rate term is 3 months of interest. You can also typically go from variable to a fixed rate term without penalty with most lenders.
✅ Renewals and refinances → Shop aggressively. Don’t just sign your lender’s renewal offer — brokers like me can often find a better deal.
My Advice as a Mortgage Broker
- Get a pre-approval now. This locks in today’s rate for up to 120-150 days, shielding you from further increases.
- Stress-test your budget. Make sure you can handle payments at today’s rates — or higher.
- Consider a blend-and-extend. Some lenders will let you combine your current rate with a new one to soften the blow.
Most importantly, don’t go it alone. With the market shifting quickly, working with a broker can help you compare multiple lenders, negotiate better rates, and find a mortgage solution that fits your unique situation.
Final Thoughts
The era of ultra-low fixed rates in Canada is over — at least for now. But that doesn’t mean homeownership is out of reach. With careful planning, smart advice, and the right strategy, you can still make a move that works for you and your family.
If you’d like a free mortgage review or want to explore your options, reach out to Homewise. We can do everything remotely via telephone, email, and our online platform.
