The December Canadian CPI Inflation Report came out earlier this month and we saw a slight increase over the November data, with headline inflation coming in at 3.4%, up from 3.1%.  This was not widely unexpected as many economists have predicted that we'll see 'choppy' inflationary data over the next couple months.  The Bank of Canada has even publicly stated they expect to see inflation stay in the 3.0%-3.5% range, until the spring/summer when they believe it should begin to head down to the 2.5% range by the end of the year, finally getting to their 2.0% target in 2025.

In early October, we saw the Canadian bond yields top out and begin an almost 3-month downtrend, which led to fixed mortgage rates in Canada coming down in November, and for most of December.  We even saw some 5-year fixed rates coming in at 4.89% and sometimes even slightly better, depending on the bank/lender and whether the mortgage was CMHC-insured, or owner occupied.  We expect these fixed rate decreases to now stall out and we could even see some small increases over the next month or two.  This is because Canadian bond yields have started to rise slightly since the holidays and that is where fixed rate mortgages are priced from.  Given that we expect inflationary data to be choppy over the next couple months, we don't anticipate any notable fixed rate decreases again, until the Bank of Canada officially changes to 'dovish' language, OR, if we see any unexpected changes to inflation/unemployment/GDP in the near-term.

With this information in hand, if you have a mortgage renewal coming up or plan to purchase a home in the short-term, it may be wise to get a pre-approval completed to lock in some interest rates and protect yourself from any possible short-term rises in fixed rates.