Why Mortgage Rates Are Being Pulled in Two Directions

Why Mortgage Rates Are Being Pulled in Two Directions

What Homeowners in British Columbia and Alberta Should Know

Mortgage rates have been one of the most talked-about topics in Canadian real estate over the past few years. Every announcement from the Bank of Canada tends to spark speculation about whether rates are about to drop, stay the same, or climb again.

But the reality is that mortgage rates today are being pulled in two different directions at the same time.

For homeowners and buyers in British Columbia and Alberta, understanding these competing forces can help make sense of the headlines and allow you to make more informed decisions about your mortgage strategy.

A Slowing Economy Is Putting Downward Pressure on Rates

One of the most important factors influencing mortgage rates right now is the broader health of the Canadian economy.

Recent labour market data has started to show signs that economic momentum may be weakening. According to Statistics Canada, the Canadian economy lost 84,000 jobs in February, following another 25,000 job losses in January. As a result, the national unemployment rate increased to 6.7%.

When you step back and look at the bigger picture, these losses have essentially erased most of the job gains that occurred late last year. In fact, Canada has seen very little net job creation over the past six months.

Economic indicators like employment, GDP growth, and consumer spending are closely monitored by policymakers because they signal the overall strength of the economy. When job growth weakens and economic activity slows, it often creates pressure for interest rates to eventually move lower in order to support economic growth.

We are also beginning to see signs that inflation is gradually cooling and economic growth is coming in weaker than many forecasts expected. If these trends continue, they could give the Bank of Canada more room to reduce rates over time.

Inflation and Global Events Are Pushing the Other Direction

At the same time, there are forces pushing mortgage rates in the opposite direction.

Inflation, while lower than the peak levels we saw a couple of years ago, has proven to be stubborn in several areas of the economy. Housing costs, services, and energy prices continue to put upward pressure on overall inflation.

Global events can also quickly influence inflation expectations. Rising geopolitical tensions in parts of the world have recently pushed oil prices higher. Energy prices play a significant role in inflation because they affect everything from transportation costs to manufacturing and food production.

When oil prices surge, the ripple effect spreads throughout the economy, raising costs for businesses and consumers alike. If these price increases persist, central banks must be cautious about lowering interest rates too quickly.

This is one reason why the Bank of Canada often takes a wait-and-see approach, carefully balancing the risk of slowing economic growth against the risk of inflation rising again.

Why Fixed Mortgage Rates Don’t Always Follow the Bank of Canada

One common misconception is that mortgage rates move directly in line with Bank of Canada decisions.

In reality, the relationship is more complex.

The Bank of Canada directly influences variable-rate mortgages and home equity lines of credit through its overnight policy rate. However, fixed mortgage rates are primarily influenced by bond markets, particularly Government of Canada bond yields.

Recently, Government of Canada bond yields have been climbing due to a combination of rising global bond yields and higher oil prices. As a result, lenders have started adjusting fixed mortgage rates upward in response.

In fact, typical fixed mortgage rates have already increased by roughly 0.20% in recent weeks as bond markets react to these changing conditions.

This is why mortgage rates can move even when the Bank of Canada hasn’t made an official rate announcement.

What This Means for Homeowners in British Columbia and Alberta

For homeowners and buyers across British Columbia and Alberta, these competing forces mean mortgage rates may continue to move in short cycles rather than one clear direction.

On one side, weakening economic data suggests rates could gradually trend lower over time. On the other side, inflation risks and global instability could keep rates elevated longer than many people expect.

In British Columbia, where home prices remain among the highest in Canada, even small changes in interest rates can significantly affect affordability and monthly payments.

In Alberta, strong population growth and migration into cities like Calgary and Edmonton have kept housing demand relatively resilient, but borrowing costs still play a major role in purchasing power and mortgage planning.

Because of this uncertainty, mortgage strategy has become just as important as the rate itself.

A Practical Strategy for Buyers and Renewals

If you’re currently shopping for a home or expect to purchase in the next few months, securing a mortgage pre-approval can be a smart move.

Most lenders will hold a mortgage rate for up to 90 - 120 days, which can protect you from potential short-term increases while you search for the right property.

For homeowners approaching a renewal, it may also be worth reviewing your mortgage options earlier than you normally would. Even small differences in rates, amortization strategies, or mortgage features can have a meaningful impact on long-term borrowing costs.

The Bottom Line

Mortgage rates today are not moving in a straight line because they are being influenced by two powerful forces happening at the same time.

A slowing economy is creating pressure for interest rates to move lower.
Persistent inflation and global uncertainty are pushing in the opposite direction.

As these forces continue to compete, mortgage rates may fluctuate as new economic data and global developments unfold.

For homeowners and buyers in British Columbia and Alberta, staying informed and reviewing your mortgage options early can help you navigate this changing environment with more confidence.

Thinking About Your Mortgage?

Whether you’re purchasing a home, refinancing, or approaching a renewal, understanding how mortgage rates are evolving can help you make better decisions.

If you’d like a second opinion on your mortgage options or want to review your strategy, feel free to reach out.

Rob Skoko
Mortgage Broker
MAXIMUM Mortgage Solutions

📞 604.771.4085
✉   rob@skoko.ca
🌐 skokomortgages.ca