Mortgage Fun and Games #43

by Shawn Lackie

By the time you read this, there will have been another announcement from the Bank of Canada (BoC), regarding the prime lending rate. Since this story was filed well before that date, I would have needed a crystal ball to say what’s next. My gut instinct told me, with all the crazy stuff going on of late, the rates would either hold firm or even go up a quarter point.

To get some background information for this, I reached out to Brad Vokins. Brad is a local mortgage specialist with Dominion Lending Centres. He’s been at it for 20 years, so he really knows his stuff. I will let him explain why things are so tenuous right now.

Just a little over a month ago, the Canada five-year bond was down as low as 2.5 percent and as of today, it’s at 2.97 percent. You are starting to see an increase in rates, across the board, with some lenders starting to increase insured rates as high as 4.34 percent and conventional rates as high as 4.64 percent, compared to 3.99 percent to 4.44 percent. Before the inflation rate release, on Tuesday, 70 percent of traders were betting on a rate cut, by the bank, in Canada, in June. That has now dropped to 40 percent. The annual inflation rate in Canada fell to 1.7 percent, in April of 2025, from 2.3 percent, in the previous month. This was slightly above market expectations of 1.6 percent but still reflected the softest increase in consumer prices in seven months.

The slowdown was driven by a decline in energy prices, due to the removal of the consumer carbon tax. On the other hand, costs accelerated for travel tours, groceries, household operations, furnishings, equipment, recreation and education. The trimmed-mean core Consumer Price Index (CPI), which is closely followed by the BoC for underlying inflation, unexpectedly accelerated to 3.1 percent, the highest in two years. The 'CPI trimmed mean' is a measure of core inflation which is designed to provide a more accurate picture of underlying inflationary pressures, by removing the effects of temporary or volatile price changes (source: Statistics Canada). This report will reinforce the Bank of Canada's cautious stance on easing, to mitigate the impact of tariffs. Traders have lowered bets, the central bank will cut rates at its next meeting, putting the odds under 40 percent, compared with nearly 70 percent before the release. It will be a close call for the Bank of Canada, but even if they don't cut rates in June, more rate cuts this year are likely.

How’s that? Clear as mud? The thing is, with all the madness going on: tariffs, potential layoffs, cost of living and more, things have never been more tenuous. Which leads to a very cautious market. Add to this, the fact there seem to be more listings hitting the market, and what should have been transitioning to a buyer’s market, has become almost no market at all. With exceptions of course.

I always say, what I do know is what I don’t know, and, to always expect the unexpected. The Real Estate market has been all that and more, in the last few years. It would be nice to get back to a balanced market. Yet, I wouldn’t expect it to happen anytime soon. We will just have to wait it out and see what’s next.