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Unprecedented Decline: Variable Rates Hit All-Time Low, Reports NBF

In June 2023, a groundbreaking 95% of new mortgages embraced fixed rates, marking a historic low in variable market share, according to Daren King of National Bank Financial.

This stark contrast to the preceding months, where up to 57% of borrowers opted for variable rates, reflects a shift in sentiment due to multiple factors.

Contrary to NBF's findings, borrowers' aversion to variable rates is not entirely unexpected, and here are six reasons fueling this trend:

  1. Premium Price Tag: The average uninsured variable rate is nearly 80 basis points higher than the lowest fixed rate.

  2. Market Expectations: Anticipations of lower rates ahead drive borrowers towards fixed rates.

  3. Upside Uncertainty: Unpredictable rate movements post-Bank of Canada messaging.

  4. Variable Reputation: Negative perceptions due to past experiences.

  5. Penalty Risk: Reluctance to pay substantial penalties for breaking a variable term.

  6. Tougher Qualification: Stricter qualifying criteria for variables.

Mortgage Gymnastics for borrowers under pressure

Revealing data illustrates that the lowest nationally-advertised uninsured stress test rate at 7.79% (5-year fixed) provides borrowers:

  • 8.2% more mortgage compared to a 1-year fixed

  • 5.2% more mortgage than a 2-year fixed

  • 3.3% more mortgage compared to a 3-year fixed

  • 1.3% more mortgage than a 4-year fixed

  • 4.9% more mortgage than a variable fixed

The Latest Rate Insights

Rate Insights

As mortgage rates align with rising yields, various catalysts trigger discussions of an ongoing bond bear market. Factors include a brighter growth outlook, rising federal debt-servicing concerns, larger deficit spending, increased bond issuance, diminished foreign investment, changes in the Bank of Japan's yield curve control, and structurally higher inflation.

Long-run regression line of the U.S. 10yr yield

This multi-faceted selling pressure prompts three potential rate scenarios:

  1. A dramatic surge in rates, defying expectations.

  2. A black swan event leading central banks to cut rates.

  3. Modest rate increase and stabilization.

Canada GDP Annual Growth Rate over Canada Interest Rate

In the current mortgage landscape, short-term rates spanning one to three years occupy the majority share. As yields trend upward, borrowers exploring 1- to 3-year fixed rates are urged to secure their terms promptly.

Of note, the week saw the three-year fixed rate take a hit, rising almost a quarter-point since the previous report, impacting its competitiveness compared to 1- and 2-year terms.


  • Renewal Landscape: Declining origination volumes intensify competition among lenders for renewal deals.

  • Oil's Influence: Fluctuations in WTI oil prices could impact inflation and interest rates.

  • Yield Projections: BMO Capital Markets' Sal Guatieri projects that 10-year bonds could eventually settle 50-100 bps above the neutral rate.

Ready to explore further? Reach out to me today and start a conversation about your mortgage needs. Your financial journey matters to us.


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