Bank of Canada cuts interest rates to drive down floating rates, borrowers still prefer fixed rates

With the latest interest rate cut by the Bank of Canada, most lending institutions have lowered their floating rates by 0.25%. Financial columnist Robert McLister of the Financial Post pointed out that this means that the leading floating rate is now only 86 basis points higher than the lowest fixed rate, while in March this gap exceeded 150 basis points.

Combined with the expectation of further interest rate cuts by the Bank of Canada, this will attract more borrowers to take the risk of choosing floating interest rates.

However, McLister believes that the interest rate gap needs to be further narrowed in order for a large number of borrowers to join the ranks of floating interest rates. He believes that it will take a long time to reach the level where floating interest rates account for 57% of the market share in 2022.

For those who cannot afford interest rate risk, the minimum guaranteed five-year fixed interest rate now is 4.44%. At the same time, the uninsured five-year fixed interest rate has finally surpassed the 5% threshold and is now 4.99%.

The best choice in the fixed rate field is still the three-year fixed rate, especially when you can find a rate of 4.99% or lower. In the interest rate model, the performance of three-year fixed rates is not as good as floating rates, but many people prefer to maintain a certain degree of certainty until 2027.

Here are the lowest mortgage rates as of this week: