In case you missed the latest episode of 'As the Crude Barrels Turn,' the oil market continues to defy gravity. This matters for mortgage pricing because the bond market and the Bank of Canada are paying close attention.
Oil's Impact on Mortgage Rates
Oil is currently the primary driver of inflation, which in turn drives central bank policy and bond yields—the two key factors influencing mortgage rates. Fortunately, two things are working in borrowers' favor.
First: Core Inflation Drop
Oil has not yet boosted underlying Canadian inflation by most official measures. Average core inflation plunged last month, nearly reaching the Bank of Canada's two percent target. While this may not continue with oil at $100 per barrel, it is a positive development for now.
Second: Crude Futures Stability
Crude futures are currently trading near levels seen on March 9, the day President Trump declared his war on Iran 'very complete' and ahead of schedule. That was two and a half months ago, so the timeline has extended, but prices have not surged further.
Locking in Rates: Not So Bad
If the prolonged war undermines confidence in inflation and you want to lock in your mortgage rate, the news is relatively good. The sharpest fixed rates are only 15 to 30 basis points above where they stood when the war began. Some offers on our rate pages still start with a three, which is a victory in the current environment.
Variable Rates Outlook
For variable rates, slumping core inflation has improved the odds that floating-rate borrowers will avoid a rate increase this year. However, when experts say 'the Bank of Canada is probably not going to hike,' remember that experts once thought the Earth was flat.
Robert McLister is a mortgage strategist, interest rate analyst, and editor of MortgageLogic.news. Follow him on X at @RobMcLister.
