The average rate on 30-year fixed-rate mortgages rose to 7.50% last week, the highest in nearly three years, causing total mortgage applications to fall 2.75% from the previous week and 37.5% from a year earlier. Borrowers are increasingly turning to adjustable-rate mortgages (ARMs), whose share reached 10.5%, the highest since October 2025, as they seek lower monthly payments; ARMs are considered riskier because rates can change after the fixed period. Refinance applications fell 56% year over year, while purchase applications dropped 16% from the same week a year ago. Although closed home sales rose slightly in August from July, NAR said August and September were the slowest months for home sales this year, home prices keep rising, and further rate increases mean fewer buyers can qualify.
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Canada currently shows a wide gap between fixed and variable mortgage rates, which can be nearly three-quarters of a percentage point. Fixed rates track the five-year Government of Canada bond yield, which has risen on inflation expectations, oil prices and global bond market pressure, while variable rates move with the Bank of Canada overnight rate. On a $400,000 mortgage amortized over 25 years, the payment difference could be as much as $165 a month, and a variable-rate borrower could pay off an extra $4,527 by the end of a five-year term, though this assumes the variable rate stays unchanged, which the author calls highly unlikely. The author stresses that the choice depends on risk tolerance and the ability to afford higher payments, and recommends consulting a mortgage specialist or broker. The piece also notes options such as static-payment variable mortgages and typically lower payout penalties on variable loans if a home is sold early.
- Faulkner : How to choose between fixed or variable mortgage rates
The gap between fixed and variable mortgage rates in Canada is now nearly three-quarters of a percentage point, much wider than in past years. Fixed rates track the five-year Government of Canada bond yield, which has risen on higher inflation expectations, partly driven by oil prices, and pressure from global bond markets. On a $400,000 mortgage amortized over 25 years, the variable option could lower payments by about $165 per month, and by the end of a five-year term about $4,527 more of principal would be paid off, though this assumes the variable rate stays unchanged. The Bank of Canada's rate decision on Oct. 28 is uncertain, so borrowers should consult a mortgage specialist, weigh their risk tolerance, and consider options such as static-payment variable mortgages, while noting that converting to fixed may mean higher posted rates.
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