As we head into the second half of 2025, the latest data from Statistics Canada points to a softening economy and easing inflation. For Canadian homeowners, buyers, and mortgage shoppers, this could spell opportunity—but also demands caution.

Last week, Statistics Canada confirmed that our core inflation measures eased in May, and our GDP shrank by 0.1% in April (month-over-month). They’re now estimating that GDP declined again in May by the same amount. This two-month trend suggests that economic momentum continues to slow, strengthening the case for additional interest rate cuts by the Bank of Canada later this year.

At the same time, bond yields dropped slightly, but not as much as you might expect given global tensions. This could indicate that we’ve hit the low end of bond yields for now, which will help keep fixed mortgage rates relatively stable in the short term.

Despite recent economic shifts, my outlook and advice remain the same.

Fixed Rates: A Smart Bet for Many

• Three- and five-year fixed rates are currently about equal, which is rare.

• Since the premium for longer-term fixed rates is starting to return, the five-year fixed offers better value right now.

• With inflation cooling and the economy softening, it’s possible rates could trend lower over the next couple of years—but locking in a competitive fixed rate today offers peace of mind and predictability.

Variable Rates: Long-Term Value, Short-Term Risk

• Variable mortgage rates will likely end up being the cheapest option over their full term—especially if the Bank of Canada cuts rates further, as expected.

• But variable rates come with volatility. If you choose this route, make sure you can stomach potential payment increases in the short term if the BoC takes longer than expected to ease policy.

The Bank of Canada Outlook

• The BoC’s next meeting is on July 30, and while markets are not expecting a cut just yet, they do anticipate two more 0.25% cuts before year-end.

• The current policy rate sits at 2.75%, which is the mid-point of the BoC’s neutral-rate range. It won’t become truly “stimulative” until it drops closer to 2.00%—a level we’ve seen in the last five rate-cutting cycles going back over 25 years.

The BoC is data-driven, and declining GDP, softer employment numbers, and slowing retail sales all support the case for further cuts.

We’re in a delicate phase of the economic cycle: inflation is cooling, but the economy is softening too. That’s a mixed bag for mortgage rates—but ultimately a signal that the rate environment could continue to improve for borrowers. The right choice comes down to your financial situation, risk tolerance, and long-term plans.

If you’re unsure which direction to take, let’s connect. A quick chat could help you make a more informed—and confident—decision about your next mortgage move.