Bet on fixed, not variable, National Bank economist tells brokers
“It seems like mortgage holders are betting the house on short-term rates,” he said.
“In my forecast, I’d say, well, consider the 5-year rate because, you know, I think it’s attractive given what’s happening in the economy.”
His view runs against the current of the market. Variable-rate insured mortgages are running at approximately 3.79%, below the best five-year fixed insured rate of approximately 4.04%. That spread has driven a modest recovery in variable demand, with the variable-rate share climbing to 26% of the market, the first increase in three years, per a Mortgage Professionals Canada consumer survey conducted in February.
The case for caution
Marion argued the spread is misleading in the current environment. Geopolitical disruption, rising global defence spending, and an AI-driven electricity build-out are all exerting sustained upward pressure on long-term bond yields.
The Bank of Canada itself noted at its September 2 hold that “long-term bond yields have moved up globally, including in Canada” and signalled it was “prepared to adjust monetary policy as needed,” language that put an October hike back on the table.
