As we move through January, financial markets are being pulled in opposite directions. The result has been a fairly familiar one lately: bond yields are stuck in a holding pattern, and mortgage rates remain relatively stable, even as the headlines feel anything but calm.
What’s happening with rates and bond yields
On the Canadian side, the data has been soft. Manufacturing sales fell sharply in October, led by a steep drop in auto production, and oil prices pulled back after recent gains. These factors normally push bond yields lower, and they did, briefly.
At the same time, stronger-than-expected U.S. employment data has been pulling yields in the opposite direction. Fewer Americans filing for jobless benefits suggests the U.S. economy is still running hotter than expected, which keeps pressure on the U.S. Federal Reserve to hold rates steady.
Layer on growing political tension around the U.S. central bank, and investors are left cautious rather than confident. The net result is that Canadian bond yields — which directly influence fixed mortgage rates, have gone largely sideways.
For now, this means:
- No immediate upward pressure on fixed rates
- No clear catalyst for meaningful drops either
- Ongoing day-to-day volatility without a clear trend
Market pricing currently suggests an 82% chance of no change at the upcoming Bank of Canada meeting, with similar expectations for the Federal Reserve.
Housing market: softer momentum, very regional outcomes
Nationally, home sales slipped again in 2025, and prices continue to drift lower when adjusted for inflation. While interest rates are no longer the primary barrier they once were, confidence has clearly taken a hit.
Ontario and B.C. remain the softest regions, with longer days on market and more listings. In contrast, Quebec, the Prairies, and parts of Atlantic Canada are still showing year-over-year price growth, supported by tighter supply.
A few notable trends worth keeping in mind:
- Inventory levels have risen to their highest point in about six months
- Condos continue to underperform detached homes
- Sales volumes remain well below long-term averages
This environment is creating more demand for bridge and alternative financing, particularly where sales timelines are uncertain.
Inflation risk isn’t gone, just quieter
One under-the-radar theme markets are watching closely is the surge in industrial and precious metals. These rallies often signal rising input costs, which can filter through to inflation over time.
This is not a prediction of runaway inflation, but it is a reminder that inflation pressures tend to return in waves. For borrowers, this reinforces the idea that rates may not fall smoothly or predictably from here.
From a planning standpoint, this supports:
- Caution with heavy variable-rate exposure
- Balanced approaches like hybrids for risk-averse borrowers
- Longer fixed terms for clients with tighter cash flow or less flexibility
An important renewal conversation to watch
We’re also seeing more real-world friction at renewals, particularly around large lump-sum payments funded by family members.
In today’s regulatory environment, large deposits are automatically reviewed. If funds are disclosed as a loan, even from a parent, lenders are required to treat that amount as new debt. This can stall or derail an otherwise straightforward renewal.
Key reminder for client conversations:
- True gifts are generally acceptable with proper documentation
- Family loans are still loans and must be included in qualification
- Timing and structure matter more than intent
Early advice is critical. Once funds move, options can narrow quickly.
The takeaway
Markets are unsettled, but not broken. Rates are stable for now, housing activity is uneven rather than collapsing, and underwriting rules continue to tighten quietly in the background.
As always, clear expectations, thoughtful structure, and proactive advice remain the biggest value we bring to clients, especially in a market that feels uncertain but isn’t standing still.
