For months \u2014 until recently \u2014 the economic establishment largely sang in a choir, giving insufficient credibility to a Bank of Canada<\/a> rate hike this year. They had a whole binder of reasons why:<\/p>\n Core inflation was contained.<\/p>\n The labour market was deteriorating.<\/p>\n Tariff uncertainty demanded central bank patience.<\/p>\n You have to look through energy shocks.<\/p>\n Rate hikes can\u2019t solve energy shortages.<\/p>\n Bond markets<\/a> were already tightening for the central bank.<\/p>\n We heard almost every reason in the book why a hike wouldn\u2019t happen \u2014 and then it happened.<\/p>\n Now, I don\u2019t like to throw stones, especially since I\u2019ve met a lot of top economists and they seem to be good people who are probably smarter than me.<\/p>\n But even as bond yields<\/a> surged, dragging fixed mortgage rates<\/a> up by their hair, most (not all) were telling us that prime rate increases were not a significant threat.<\/p>\n Meanwhile, the bond market was pulling the fire alarm.<\/p>\n Forward and swap markets had it right for months, directionally that is; they only got the timing right in September when hike probabilities for the next meeting topped 60 per cent \u2014 my line in the sand for taking a move seriously.<\/p>\n Long before that, CanDeal DNA data showed the CORRA forward curve screaming about higher rates for over half the year, pricing in 75 to 125-plus basis points of tightening over the next 12 to 24 months.<\/p>\n At times, market expectations were implying 150-plus basis points of policy rate tightening over a five-year mortgage term.<\/p>\n The timing wasn\u2019t exactly right, but the direction was.<\/p>\n The market\u2019s message at the time (back when fixed rates were much closer to variable rates<\/a>) was crystal clear: rate cuts were dead and buried, and variable mortgages were a much bigger gamble.<\/p>\n Yet, a parade of economists kept trotting out the same tired narrative that the Bank of Canada should be cutting.<\/p>\n That disconnect leaves us with four major takeaways for your wallet:<\/p>\n 1. Ignore published rate predictions that diverge from the market.<\/p>\n If Bank of Canada rate forecasts are couched in terms of market probabilities, that\u2019s fine. But if some talking head is making their own contradictory market call, be wary.<\/p>\n Economists are great at explaining why their last forecast was wrong or spotting broad macro trends. But when it comes to calling actual rate moves, a room full of tri-letter experts (MBAs, CFAs, PhDs) is no match for the collective wisdom of traders betting trillions of actual dollars in the bond market. Pundits have opinions; the bond market has skin in the game.<\/p>\n 2. Track the forward curve.<\/p>\n In my early days on the job, I used to dutifully publish the Big Six banks\u2019 consensus rate forecasts every month because readers wanted them. In hindsight, I might as well have been publishing their horoscopes.<\/p>\n Bank economists almost always end up chasing market pricing anyway, so cut out the middleman and watch the numbers yourself.<\/p>\n Start with the two-year Government of Canada bond yield. When you see this trifecta \u2014 the two-year yield is above its 18-month moving average; it\u2019s sitting 50-plus basis points above the Bank of Canada\u2019s overnight target, and its 18-month average is below its 50-month average \u2014 start planning for potentially higher borrowing costs.<\/p>\n That signal is especially loud when it happens right after the Bank of Canada\u2019s key rate has sunk 200-plus basis points and then flatlined \u2014 like it did after June 4, 2024.<\/p>\n Is this peer-reviewed science? No.<\/p>\n Swap, futures and forward markets are notoriously wrong at times; crises come out of nowhere and there isn\u2019t a big enough sample size for a bulletproof back test.<\/p>\n Moreover, markets seldom get the magnitude of rate cycles right in advance. For all we know, a crisis could make the Bank of Canada next move a cut in 2027.<\/p>\n Hence, you shouldn\u2019t bet your financial life on market indicators or a single mechanical rule.<\/p>\n But while calling the above shortcut a rock-solid formula is foolish, calling it more useful than quants who can\u2019t see the forest for their spreadsheets is not.<\/p>\n 3. If you must trust economists\u2019 predictions, pick the right economist.<\/p>\n Not everyone got Wednesday\u2019s hike wrong.<\/p>\n On November 12, 2025, for example, Scotiabank Economics wrote<\/a>, \u201cThe Bank of Canada is done cutting rates, with the next move expected to be an increase in the policy rate in the second half of 2026.\u201d<\/p>\n That was nearly a year ahead of the hike we just got. Scotiabank\u2019s team, led by Jean-Fran\u00e7ois Perrault and Derek Holt, has been ahead of the curve most of this year.<\/p>\n Were they lucky? Maybe a little.<\/p>\n Obviously, nobody had \u201cwar drawn up on a napkin and paid for at the pump\u201d on their 2026 bingo card.<\/p>\n Mind you, the bank did have more conviction in its hike call after energy costs started zooming, while many others were too busy focusing on economic risks.<\/p>\n Moreover, Scotiabank nailed some core drivers way ahead of most, like rising input costs, fiscal support boosting 2026 growth, steady wage growth and more.<\/p>\n A few others were right as well, including National Bank strategist Ethan Currie, who last December called for hikes late this year.<\/p>\n 4. Don\u2019t predict. Manage risk.<\/p>\n Pro forecasters have it tough. They get paid to stand in front of a camera and guess the future, but the future likes to change its plans without notice.<\/p>\n Fortunately, you don\u2019t need a magic crystal ball to manage mortgage risk \u2014 you just need a sense for where we sit in the cycle.<\/p>\n History shows that floating your mortgage wins most of the time, except at certain major inflection points.<\/p>\n Before the first hike in a new cycle, for example, markets start pricing in tightening well in advance. The two-year government yield starts creeping up and inflation starts looking spicy. All else being equal, that\u2019s your cue to look hard at three- to five-year fixed rates (assuming your five-year plan, net worth and stomach for volatility agree).<\/p>\n But it also depends a lot on what rates<\/a> you can access. Near the top of rate cycles, you might get a one-year fixed that\u2019s a far better deal than a variable, for example.<\/p>\n Most importantly, remember that what goes up eventually meets gravity. Once the Bank of Canada starts hiking, inflation almost always gets wrestled back to target within a few years.<\/p>\n Locking into a five-year fixed after five-year yields have already mooned and the central bank has hiked multiple times is like buying flood insurance after your basement is underwater.<\/p>\n \t\tEditor\u2019s Picks\t<\/p>\n If at that point you still need the peace of mind that comes with a fixed rate, consider a shorter leash, like a three-year term.<\/p>\n At the end of the day, this is just basic rate-cycle hygiene. You don\u2019t need a panel of TV experts to figure it out, so do your sanity a favour \u2014 grab the remote and hit mute.<\/p>\n For the best national insured and uninsured mortgage rates, updated daily, please visit our mortgage rate page here<\/a>.<\/p>\n
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