Is The Economy Into You?
Canada’s Economy Is Sending Mixed Signals. Should You Be Into Them?
June 2026
Lately at TOM + ANAIS, we’ve been wondering: what if they’re just not that into you? And should we still be into them?
And by “they” — we mean, of course, the economy. They’ve been extremely hard to pin down lately. They’ll text us one day to tell us that Bank of Canada rates are going the right direction, only to go silent for weeks and then peek up randomly on a Saturday night with an “Inflation up?” text.
We don’t know why they insist on doing this, but the outcome is very confusing – mortgage rates should be getting more competitive, yet fixed rates remain higher than they should be.
Well before we decide if its time to break up, we thought it might be better to do a break down — why is this economy acting so hot and cold, what indicators (like bond yields and inflation) are making them act out this way, and what this might mean for well-meaning mortgage holders just looking for a little consistency and an end to the mixed messages.
Bond Yields: That Mysterious Number Still on Their Phone
So we agree Canada’s economy is sending mixed messages right now. Growth is slowing, inflation is proving sticky, and markets are reacting in real time. The Bank of Canada’s prime lending rate has been dropping and is now holding steady, and yet fixed rates remain static.
One of the reasons for this is bond yields. The 5-year Government of Canada bond yield is the key benchmark for most fixed mortgage rates in Canada. Variable rates move more directly with the Bank of Canada’s overnight rate, but fixed rates are shaped by what bond investors expect for inflation, growth, and future interest rates. When investors demand higher yields, lenders typically adjust mortgage pricing upward.
That’s why many borrowers have been surprised to see fixed rates remain elevated—even as broader conversations shift toward the possibility of future rate cuts. Over the past several weeks, the 5-year bond yield has climbed back above 3%, reaching levels not seen since mid-2024. And while many people focus on Bank of Canada announcements, it’s often the bond market that has the biggest day-to-day influence on fixed borrowing costs across the country.
Inflation and Growth: Economic Emotional Baggage
Every time we think we have the economy figured out, inflation also comes back into the picture. If bond yields are that mysterious ex we still wonder about, let’s consider inflation and growth to be that emotional baggage that the economy just can’t let go of.
Recent inflation data has been a reminder that price pressures haven’t fully disappeared. Energy is one of the biggest watchpoints. Geopolitical tension in the Middle East has pushed oil prices higher, and that matters because rising energy costs tend to ripple through the broader economy, from transportation to manufacturing to household expenses. In response, bond markets are demanding higher yields to account for the risk that inflation could stay elevated longer than expected.
At the same time, the growth side of the story is clearly softening. Canada is now in a technical recession, with two consecutive quarters of negative growth. Consumer insolvencies are rising, housing activity remains muted, and unemployment has been edging higher.
Canadian banks are still reporting solid earnings, but much of that strength is being driven by capital markets activity rather than broad economic momentum. Taken together, this creates a difficult backdrop: slower growth on one side, lingering inflation pressure on the other.
The Bottom Line: Love Them or Leave Them?
For homeowners, renewers, and prospective buyers, the takeaway is nuanced but important: this economy is going to continue to play hard-to-get no matter how fast we text back, with mortgage rates staying relatively elevated even if the Bank of Canada begins easing policy.
While the Bank of Canada is expected to keep its policy rate steady for now, fixed rates are likely to continue to average about 4% with variable rates sitting just below that because the bond market—not just the central bank—plays a major role in where mortgage pricing ultimately lands. As long as long-term bond yields remain above 3%, borrowers should be prepared for a rate environment that stays higher than many expected a year ago.
That said, just like when it comes to affairs of the heart, things can change quickly. In the months ahead, inflation, energy prices, and bond yields may matter even more than the next Bank of Canada announcement (scheduled for this Wednesday). Because we can lock in rates for 120–130 days, don’t wait for them to text you first—start the conversation on your own terms, sooner rather than later, if you’re planning to buy, renew, or refinance.
Let TOM + ANAIS provide you with mortgage advice that is clear, proactive, and tailored to real life, not just headlines (or Saturday night texts). If you’d like to chat through your next step, we’re here to help.
