Rolling the dice

Didja see the query from blog dog Nick the other day? He echoes what a lot of people feel who are facing renewals this year – and there are more than a million of them.

“Thanks for the blog, it’s usually the most educational part of the day,” he wrote, in an acceptable MSU.

“I have a variable @3.2% that is up for renewal in the fall. The bank is offering 3.75% on a five year variable or 3-5 year fixed terms at 3.9-4.1%. I’m thinking a fixed isn’t the worst idea until the douche canoe to the South is gone, but have always gone variable…

“Is the slight premium on the fixed a smart choice to insulate from the dipshittery that seems to be par for the course these days?”

The advice given here was simple. Go long, not VRM. Paying a measly one-quarter of one per cent premium for a rate locked up until after Donald Trump is merely a bad memory seems deeply wise. It’s cheap insurance.

Now, let’s be frank. This is exactly counter to what most Canadians have been doing.

According to the faeries at CMHC, borrowers in late 2025 and into this year have been flocking to variable and short-term financing. VRMs are now the most popular girls at the prom due to “continued uncertainty around the rate outlook.”

In fact variable-rate mortgages now account for 42% of extended mortgages being taken at the Big Banks – compared with just 11% of borrowers seeking traditional five-year fixed-rate loans.

Why would this happen during times of economic stress, geopolitical upheaval, rising unemployment, the resurgence of inflation and a rogue, unpredictable, aggressive, imperialistic and autocratic ruler of the most powerful country on earth? That we sit beside?

Part of the reason is price, the agency says, as VRMs become slightly cheaper than the longer, more stable stuff. Maybe some folks aren’t really sure how a VRM works, not realizing any increase in the bank prime rate – which happens within 24 hours of a Bank of Canada move – is immediately reflected in a higher mortgage cost.

And, of course, a lot of people are simply gambling rates will come down in the future because, you know, they want them to. Or their BIL, the pool maintenance guy and fitness blogger, told them what to expect in terms of monetary policy from the incoming Fed chair.

In fact, CMHC says this is all part of a trend in recent years towards shorter and shorter mortgage terms, after about a century of borrowers – especially first-time buyers – locking in to fiver money. Is this wise?

After a century of safe, people take a gamble

Probably not.

There are a lot of families facing renewal in 2026, although the bulk of the refinancings took place last year. There was no ‘mortgage cliff’ that thousands of households fell off of. No tsunami of new listings, precipitating a price crash. In fact recent stats show property markets are stabilizing. Sales have been inching upward. Price declines going downward. Some markets tracking higher prices. Multiple offers have returned to demand hoods, and the rutting season of ’26 will likely look more realtor-friendly that the last two springs.

Mortgage arrears are up a bit, but still ridiculously low. Canadians do not walk away from high loan costs or their homes. And the new mortgage rules – allowing 30-year borrowings and loans to a higher ($1.5 million) limit – have pushed up the level of insured bank mortgages to 54%, from 40%. Yeah, safer.

So why lock in now?

Inflation is back, as we all know. Energy prices and supply chain disruptions have ignited prices and the expectation that increases will continue. The Trump War could end tomorrow and oil would still cost far more than pre-war levels for at least another year. Global trade has been upended, food inflation fed with a 100% increase in fertilizer costs and central banks face a big problem. Drop rates to please politicians or fight unemployment – or raise them if inflation gets gnarly, as it did post-Covid (our last shock).

Well three things seem clear. (a) No rate changes, either way, in the next few months. (b) Inflation gets worse. Like, a lot. (c) The next interest rate movement will probably be up.

Trump will be with us until January of 2029. After the midterm elections this autumn, he may well become more extreme, having nothing to lose politically and keen to refashion America – and beyond – even more in his image. He cares about history and image, not inflation and citizens.

Take shelter where you can, Nick. Your home’s a good place to start.

About the picture: “Scout is looking for good news,” writes Bonnie. “Thought you might enjoy another Scout (the Village dog) photo.  She is a year old now and enjoying life in Powell River mostly,  but visiting Courtenay, BC this weekend. Thanks for all the great reading material.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.