As we head toward the end of the year, markets continue to send mixed signals. Rates are no longer on a straight downward path, but the good news is that funding costs remain relatively stable and there are no immediate signs of upward pressure on mortgage pricing.  

Oil Prices and Why They Still Matter for Mortgage Rates 

Oil prices are sitting near multi-year lows, which naturally gets people asking whether mortgage rates are about to fall further. The answer is: sometimes, but not always. 

Over time, oil prices and Canadian five-year bond yields tend to move in the same direction, but it’s far from a perfect relationship. Strong economic growth usually pushes oil prices higher, which feeds inflation and, eventually, higher interest rates. On the flip side, falling oil prices often help cool inflation and ease rate pressure. 

That said, extremes matter. Very high oil prices eventually hurt growth, which can pull rates back down. Very low oil prices can also hurt Canada’s economy since we are a major energy exporter. Lower oil can weaken the Canadian dollar, which in turn can “import” some inflation and offset part of the benefit. 

Bond Yields and Rate Direction 

Recent U.S. economic data continues to be murky. Employment numbers, retail sales, and business activity are all pointing to an economy that’s slowing, but not collapsing. In periods like this, bond yields tend to drift lower or move sideways, which is exactly what we’ve been seeing. 

Canadian and U.S. five-year yields edged slightly lower this week, and fixed mortgage pricing remains well-anchored. Importantly, spreads between government bonds and insured mortgage rates are sitting just below long-term averages. That suggests lenders are not under pressure to reprice mortgages higher in the near term. 

In short, fixed rates may move around modestly, but there’s no signal right now pointing to a sudden jump. 

Inflation: Cooling, but Not Gone 

Canadian inflation held steady at 2.2% in November, right in line with expectations. Core inflation measures are easing and trending closer to the Bank of Canada’s comfort zone, even if some categories, like groceries, remain stubbornly high. 

Rent inflation is starting to slow, travel costs have come down, and overall price pressures look manageable. From a mortgage perspective, this supports the Bank of Canada’s current “wait and see” stance rather than forcing further rate hikes. 

Housing Market Snapshot 

National home sales were down year over year in November, and prices slipped modestly. Activity has clearly moved into a holding pattern as buyers and sellers wait for clarity on rates and the broader economy. 

Ontario and B.C. continue to feel the most pressure due to higher inventory levels, while other regions remain more balanced. Importantly, CREA and most economists expect activity to pick up next year as pent-up demand returns and rate expectations stabilize. 

For brokers, this reinforces the importance of setting realistic expectations: we’re not in a booming market, but we’re also not in a crash. 

Population Trends and Why They Matter 

One of the bigger macro stories is Canada’s population slowdown. For the first time outside of COVID, the population declined slightly, driven by a sharp reduction in temporary residents like international students and temporary workers. 

This shift is already easing pressure on rentals and services inflation, especially in Ontario and B.C. Longer term, it may improve productivity and income per person, but it also means slower overall economic growth in the near term. 

For housing, it suggests less immediate demand pressure, but also less inflation risk. 

Mortgage & Client Talking Points 

A few timely reminders you can use right now: 

Clients thinking about buying in the next few years should open an FHSA before December 31 if they haven’t already. Contribution room only starts once the account is opened, even if no money goes in yet. 

Fixed rates appear to be near the “new normal” range for now. While small moves are possible, the window for dramatic drops has likely passed unless there’s a major economic shock. 

Variable strategies remain relevant for flexibility, especially for clients anticipating moves, refinancing, or shorter-term plans. 

Final Thoughts 

Markets are calm, but cautious. Inflation is behaving better, rates are stable, and housing is finding its footing. This is a relationship-driven environment where education and thoughtful planning matter more than rate-chasing.