Interest rates have further to fall, but fixed mortgage rates are already nearing their bottom

The Bank of Canada is widely expected to cut its headline interest rate by an additional 2 or 2.5 percentage points in the coming year, but fixed rates for five-year and three-year mortgages will likely drop by much smaller amounts.

That’s because banks and mortgage providers often set their long-term mortgage rates based on the performance of bond markets. In general, weaker bond yields tend to align with lower rates, while stronger ones correspond with higher rates.