Variable-Rate Mortgage Holders May Not Get Interest-Rate Cut They Hoped For

Canada's variable-rate mortgage holders may not benefit from an interest-rate cut by the Bank of Canada (BoC) next week, as market expectations have dropped significantly in recent weeks. Initially, markets anticipated a 60-per-cent chance of a 25-basis-point cut following a weaker-than-expected federal jobs report. However, with the release of concerning inflation numbers in May, the odds now stand at just 75 per cent of a rate hold on June 4.

Key Takeaways:

• Market expectations for a Bank of Canada interest-rate cut have dropped from 60% to 75% in recent weeks.
• Economists now predict only one or two interest-rate cuts by the end of 2025, down from initial expectations of three more 25-basis-point cuts.
• Variable-rate mortgages are generally only one rate cut away from being cheaper than a five-year fixed mortgage.
• However, variable-rate mortgages come with risk, requiring consideration of potential rate increases and the level of uncertainty that brings.
• Ratehub.ca, a mortgage-rate comparison marketplace, sources mortgage rates.
• Ratehub.ca provides the lowest available mortgage rates for each term/type and category as of market close on May 29.

Statistics:

• 60-per-cent market expectation of a 25-basis-point interest-rate cut on May 29 (dropped to 75% by May 31) (Source: Ratehub.ca)
• 25 basis points in a percentage point
• Three more 25-basis-point cuts initially anticipated by the end of 2025 (down to one or two interest-rate cuts by economists)
• 75-per-cent market expectation of a rate hold on June 4 (Source: Ratehub.ca)
• May 29 market close date (Source: Ratehub.ca)

Sources:

• Ratehub.ca, "Today’s Mortgage Rates" (multiple terms/types, daily market close)
• Ratehub.ca, "Mortgage Brokerage and Comparison Marketplace"