In today’s episode of Make Money Count, Marcus and Justin imagine something that will never actually happen: every major Canadian bank’s economist showing up to the same cocktail party, all getting asked the exact same question. What happens to your mortgage rate next?
Here is what each of them said, and why the answers were not nearly as aligned as you might expect.
Four Banks Walk Into a Party
The Bank of Canada held its overnight rate at 2.25% at its mid-July meeting, and has signaled it intends to keep it there for now. The stated target is a return to 2% inflation by early 2027, but that projection comes with a major caveat: it depends heavily on where oil prices land.
Recent inflation readings have been running above target, and Marcus traces the source straight back to oil and gas prices, which work their way into transportation costs, food costs, and eventually the broader basket of goods that CPI measures.
Three Agree, One Doesn’t
Ask RBC, TD, and BMO what they expect for growth and rates, and you get a remarkably similar answer. All three see slow growth through 2026 and 2027, and all three expect the Bank of Canada to hold. RBC points to flat population growth and a slowing labor force as the biggest drag. TD and BMO both lean on US trade tariffs as the primary headwind.
Then there’s Scotiabank. While the other three are calling for a hold, Scotiabank’s economist is projecting two rate hikes over the next year, betting on stronger Canadian growth and continued inflation pressure from the Middle East. It is a notably more aggressive call than anyone else at the table is making, and Marcus points out this is not exactly new territory for Scotiabank.
What’s Really Keeping Inflation Elevated
One chart from RBC’s own economic reporting stood out. It tracks Canadian firms’ long-run inflation expectations, and even with oil prices spiking toward $100 a barrel amid the Strait of Hormuz conflict, those expectations have stayed relatively steady. That matters more than it might seem. Inflation expectations feed directly into actual inflation, so a business base that is not panicking helps keep price growth in check. The risk is that this steadiness does not hold if oil prices stay elevated for much longer.
Where Justin Lands: The Case For Variable
With a fixed rate sitting around 4% and variable roughly 60 basis points lower, Justin makes the case that variable is still the better move right now, and lays out four reasons why.
Most Canadians, about 75%, break their mortgage before the end of their term, which means the flexibility of variable tends to matter more than people plan for upfront. A good broker is also watching rate movement in real time and can advise on the right moment to lock in, rather than leaving that decision to guesswork. Justin’s own read is that rates are likely to land lower than what the broader market is currently pricing in, largely because he expects oil prices to ease as geopolitical tensions cool. And breaking a fixed rate mortgage early comes with real costs, which circles back to why so many Canadians end up needing that flexibility in the first place.
What This Episode Is Really About
Four banks were asked the same question and came back with three answers that mostly agree and one that stands apart entirely. That gap says a lot about how much uncertainty is still baked into where rates go from here, and why the source of that uncertainty, oil prices and their ripple effect on inflation, is worth watching closely over the next few months.
Not sure what your mortgage options are? Talk to a Cannect expert now.
Watch the full episode of Make Money Count for the complete breakdown. Subscribe to the Cannect YouTube channel for weekly mortgage and real estate insights you will not find anywhere else.
