The Bank of Canada did exactly what everyone expected this week: nothing. The overnight rate remained at 2.25%, variable mortgage holders were able to keep their predictable payments, and the central bank signaled that it's likely done cutting for a while. Case closed, right?
Not even close.
While Tiff Macklem was holding steady in Ottawa, bond traders were having a very different conversation. Government of Canada 5-year yields climbed to around 3.0% (levels we haven't seen since August) and lenders responded by jacking up fixed mortgage rates by roughly 20 basis points. The lowest insured 5-year fixed, which dipped as low as 3.69% in late November, is now back above 3.89%. Some lenders are already north of 4%.
If you're a mortgage broker or real estate agent, this is the part where your phone should be ringing. Because many clients who were casually shopping for fixed rates just watched the window close.
Why Bond Yields Matter More Than the Policy Rate
Here's the thing people forget: fixed mortgage rates don't follow the Bank of Canada's overnight rate. They follow bond yields. And bond yields react to economic data, inflation expectations, government spending, and global market forces, not central bank announcements.
November's jobs report was a stunner. Canada added 54,000 positions, contrary to economists' expectations of a slight loss. Unemployment dropped from 6.9% to 6.5%, the lowest in 16 months. Third-quarter GDP came in at 2.6%, double what most forecasters predicted. On paper, that's excellent news. In practice, it signaled to bond markets that the economy is stronger than expected, and that means less need for rate cuts, more potential for inflation, and higher yields.
Add in the $78 billion federal deficit from Prime Minister Carney's first budget, ongoing trade uncertainty with the U.S., and sticky inflation that's still running around 2.5% under the surface, and you've got a bond market that's pricing in risk. When bond yields rise, fixed rates follow. That's the game.
The Fixed vs. Variable Calculation Just Changed
For the last year, the advice was simple: variable rates were winning. The policy rate was dropping, and the prime rate was falling; anyone who locked into a high fixed rate in 2023 or 2024 was regretting it. That calculus is getting murkier.
Currently, the best 5-year variable rate is around 3.45%, while the best 5-year fixed rate is closer to 3.89%. That's still a 44-basis-point spread in favor of variable—but it was 65 basis points a month ago. The gap is closing fast.
Here's the uncomfortable truth: if you have clients who were banking on fixed rates continuing to drop, they just missed the boat. Bond yields aren't expected to head back down unless the economy weakens significantly or trade tensions ease. Neither seems likely in the short term.
What This Means for Brokers and Agents
This is where the pros separate from the amateurs. The brokers and agents who've been nurturing their databases (sending market updates, checking in on renewals, offering proactive advice) are the ones who can capitalize on this moment. The ones who went silent after closing a deal? They're receiving calls from panicked clients who have just seen their rates jump and don't know what to do.
In a market like this, client retention and engagement aren't just nice-to-haves. They're your competitive advantage. When volatility hits, the professionals who stay top of mind are the ones clients turn to. The ones who disappeared? Clients assume they don't care; or worse, they find someone who does.
The Silver Lining
Here's the good news: this isn't 2023. We're not staring down a market with 5% fixed rates and 6% variables. We're in the low-to-mid 3% range for variables and the high 3% to low 4% range for fixed. By historical standards, these are still reasonable borrowing costs. The pain of 2022–2023 is behind us.
For clients renewing in 2026, the math is also improving. TD Economics estimates that 60% of outstanding mortgages will renew by the end of next year, and while some will face higher rates, many are coming off terms with rates above 5%. A renewal at 3.89% might sting compared to the 1.5% they locked in during the pandemic, but it's a significant improvement over what they were bracing for six months ago.
What to Watch Next
The Bank of Canada's next rate announcement is January 28. That's when we'll receive updated economic forecasts, revised GDP data, and a clearer picture of where the central bank thinks the economy is headed. If inflation remains around 2%, the labour market holds up, and trade uncertainty doesn't disrupt the economy, expect rates to stay on hold through early 2026.
However, if bond yields continue to rise, driven by government spending, tariff impacts, or global market jitters, fixed rates could increase by another 10 to 20 basis points. That's not the end of the world, but it's enough to change the math for clients on the fence.
The bottom line: your clients need you right now more than they did three months ago. The ones who hear from you first are the ones who'll trust you when it's time to lock in. The ones who don't? They'll find someone else.
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