After hitting a three-year low in April, fixed mortgage rates have quietly begun to climb again. While insured rates remain as attractive as 3.79%, and a handful of uninsured options still flirt with the sub-4% threshold, most mortgage lenders have now pushed all their fixed-rate offerings above 4.00%. 

 

What’s Driving Rates Higher?

As you’ll continually hear me say, fixed mortgage rates are heavily influenced by bond yields, which have been in an upward trend since early April, with more aggressive climbs since the beginning of July. There are two notable reasons for this: 

1. Sticky Inflation

According to Statistics Canada’s report released on July 15th, The Consumer Price Index (CPI) increased 1.9% year-over-year in June, up from 1.7% in May. This upward bump in inflation wasn’t on the Bank of Canada’s wish list. Higher prices for goods and services put pressure on the central bank to keep its overnight rate unchanged rather than cut it further this summer.

The bond market didn’t take the news well, with yields soaring to their highest point since mid-January, 2025. This resulted in multiple lenders increasing their fixed mortgage rates this week.

2. Strong Labour Market

Canada’s employment figures remain resilient. Solid job growth and low unemployment signal an economy that’s still firing on most cylinders. The Bank of Canada has made it clear it won’t risk loosening monetary policy while the labour market remains tight.

 

The Bank of Canada’s Dilemma

With inflation proving “sticky” and employment still strong, a July rate cut is now off the table. The next decision on September 17th carries more uncertainty:

  • If inflation cools sharply by late summer, the BoC may come through with a rate cut to support economic growth.
  • If CPI remains elevated or ticks higher, the BoC may hold rates steady… or even hint at future hikes if tighter monetary policy becomes necessary.

As always, forecasts are educated guesses and are continually changing. 

 

What the Leading Economists Are Saying

Douglas Porter, BMO Chief Economist

“Underlying inflation remains stubbornly strong. We’ll need to see a material deceleration in core inflation before even September can be on the table for cuts, barring a steep deterioration in the economy.”

Ali Jaffery, CIBC Capital Markets Senior Economist

“The BoC will likely remain on pause in July. Waiting until the fall gives them more time to observe cost pressures, the response to tariffs, and the full impact on the economy.”

Randall Bartlett, Desjardins Group Deputy Chief Economist
“Despite trade-related headwinds, recent employment gains and a rebound in core inflation suggest the BoC will stand pat in July. If economic ‘storm clouds’ gather, they may resume cutting rates in September.”

 

Will Fixed Mortgage Rates Keep Rising?

No one can say for certain, but the balance of evidence suggests:

  • Short term (next 1–3 months): Rates are more likely to drift upward than head down, barring a sudden collapse in inflation data.
  • Medium term (by year-end): Economists from four of the big six banks still expect rate cuts of 0.50% by the end of 2025, but rising core CPI could invert that forecast into modest hikes instead. Inflation would have to continue to rise for such a radical shift would be become reality. 

For now, mortgage shoppers should assume that the era of sub-4% fixed rates is drawing to a close. Anyone with a purchase closing or with a mortgage renewal within the next 120 days should be locking in a rate ASAP. This would be your best defensive move against potentially higher rates. Should the market shift and rates start to fall, we can still get your rate dropped or even move you to a different lender if that’s what it takes. 

 

Final Thoughts 

The mortgage rate market is always changing. Many become so fixated on the expected cuts from the Bank of Canada because they may be unaware that fixed mortgage rates move independently and seem to have a mind of their own. 

In a world with so much uncertainty, choosing the right mortgage is about balancing opportunity with caution. Remember, every borrower’s situation is unique: your down payment size, goals, income stability and long term plans all play into making the right choice. I do my best to keep you ahead of the curve with the latest on what we can expect moving forward. But with everchanging economic news, market projections will shift accordingly. Whether you need professional guidance on choosing between a fixed or a variable rate… selecting the ideal mortgage term, our talented team at PMT Mortgage is here for you. Reach out today and we’ll craft a personalized mortgage strategy to designed to maximize your savings and secure the most competitive rates on the market today.