Should Mortgage Holders Break With Their Variable Rate Mortgages After Bank Of Canada Pause?

Globe and Mail - January 26th, 2023

Canada’s central bank head, Tiff Macklem, says he’s not even thinking about rate cuts.

But the bond market is.

Bond traders are projecting the Bank of Canada will start easing interest rates this fall. That, and falling inflation, have people thinking that prime rate has topped out.

Whether it is or not, I won’t hazard a guess. The bond market does the that for us, and it’s been more right than the Bank of Canada when it comes to inflation forecasting.

Meanwhile, those with variable mortgages are paying rates we haven’t seen since the dawn of this century. And now they’re wondering what to do with their lofty interest obligations.

Well, assuming one plans to stay in their home and can afford their payments, the two most obvious options are: (A) do nothing and ride the variable-rate wave, or (B) break one’s variable mortgage early and move into a cheaper fixed rate.

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