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Global Rate Path Veers Higher: What It Means for Canadian Borrowers

Global instability and rising oil prices are expected to keep the Bank of Canada from lowering interest rates as quickly as hoped, meaning higher borrowing costs for mortgages and loans will persist longer.

April 10, 20263 min read

Global Rate Path Veers Higher: What It Means for Canadian Borrowers

The Bottom Line: If you were hoping for lower mortgage payments in 2025, you may have to wait longer. Recent global shifts mean borrowing costs will likely stay high for the near future.

What This Means for You

The Bank of Canada (BoC) is unlikely to cut interest rates as fast as experts previously predicted. In fact, the chances of another rate hike have increased.

For the average Canadian, this means:

  • Mortgage payments will stay high: If you have a variable-rate mortgage, your payments won't go down yet.
  • Loans remain expensive: Borrowing money for cars or renovations will continue to cost more.
  • Savings rates stay attractive: High interest rates are good if you have money in a High-Interest Savings Account (HISA) or GICs.

Why Is This Happening?

Two main factors are driving this change:

  1. Rising Oil Prices: Oil prices have jumped recently. Because energy costs trickle down to almost everything else (shipping, heating, manufacturing), this keeps inflation high.
  2. Global Instability: New economic policies and geopolitical tensions in the United States and abroad are creating uncertainty. When the global economy looks unstable, central banks like the BoC tend to be cautious with lowering rates.

Economists had predicted the BoC would lower rates significantly by mid-2025. Now, forecasts suggest rates might remain "higher for longer" to combat these inflationary pressures.

Who Is Affected?

This news impacts three specific groups the most:

  • Variable-Rate Mortgage Holders: You are the most exposed. If the BoC decides to hike rates again to fight inflation, your monthly payments could increase immediately.
  • Renewers: If your fixed-rate mortgage is coming up for renewal soon, do not expect a significant drop in your rate compared to a few months ago. You will still be renewing at a historically high rate.
  • First-Time Homebuyers: High rates keep mortgage qualification stress tests high. This limits how much you can afford to borrow, keeping you out of the market or forcing you to buy a cheaper home.

What You Should Do

Here are three actionable steps to protect your finances:

  1. Stress Test Your Budget: Assume your current interest rate will not drop for at least another 12 to 18 months. Can you afford your current lifestyle if rates stay exactly where they are? If not, cut non-essential spending now.
  2. Lock in Fixed Returns: If you have cash to save, take advantage of the situation. Look at locking your money into a GIC or a high-yield savings account. These rates are currently very good and guaranteed.
  3. Pay Down Variable Debt: If you have a variable-rate line of credit or credit card debt, prioritize paying this off. If rates go up, the interest on these debts will grow first and fastest.

Summary

The "soft landing" where rates drop quickly is becoming less likely. With oil prices rising and global markets shifting, the Bank of Canada is expected to keep rates steady or potentially hike them.

Canadians need to prepare for a longer period of high borrowing costs. Focus on paying down debt and budgeting for higher interest payments through at least the rest of this year.

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