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Here's how October's inflation data could affect mortgage renewals

In a recent report by Statistics Canada, October's inflation rate took a dip to 3.1 per cent year-over-year, down from September's 3.8 per cent, primarily influenced by a decrease in gasoline prices. Despite this deceleration, mortgage interest costs and rent remained substantial contributors to inflation, emphasizing the economic challenges faced by Canadian households.

Mortgage interest costs, in particular, surged by 30.5 per cent compared to the previous year, propelled by the Bank of Canada's benchmark interest rate resting at a notable five per cent. As homeowners grapple with the implications of these figures, the pressing question arises: How could the latest inflation data affect mortgage renewals?

James Laird, co-CEO of, suggests that while inflation and mortgage rates are generally correlated, the recent report may not have an immediate impact on existing mortgage rates. Laird advises monitoring the trend in inflation over the next few months to gauge its trajectory back to the two-per-cent target set by the Bank of Canada.

However, with the Bank of Canada's benchmark rate hitting a historical high at five per cent, homeowners facing mortgage renewals in the near future are likely to encounter the reality of renewing at higher interest rates. The question of opting for a shorter-term mortgage upon renewal becomes pertinent.

Laird advises homeowners to align their term length and rate choice with their risk tolerance and outlook for interest rates. For those anticipating a return to lower inflation prompting rate cuts, a shorter-term loan or a variable-rate mortgage might be advantageous. On the other hand, those expecting sustained high inflation and interest rates might find security in a five-year fixed-rate mortgage.

Laird cautions against choosing a variable rate without sufficient financial flexibility in one's budget, emphasizing the need for strategic decision-making to ensure long-term savings. The decision on mortgage terms becomes a crucial financial maneuver, especially considering the current economic landscape.

Addressing the broader implications of the inflation data on household budgets, Laird suggests that Canadians may not find relief anytime soon. Although the cost of living isn't aggressively rising, it certainly isn't becoming more affordable either. Grocery prices, which rose faster than overall inflation, saw a slight slowdown in pace, increasing 5.4 per cent year-over-year in October compared to September's 5.8 per cent.

Laird notes that Canadians, irrespective of their focus on mortgage renewals or other expenses, are experiencing a sense of financial strain. The continued upward trajectory in prices across various aspects of daily life leaves homeowners with limited flexibility in their budgets, potentially impacting their ability to manage higher payments during mortgage renewals.

As Canadians navigate the complex terrain of mortgage renewals against the backdrop of inflationary pressures, strategic decision-making becomes paramount to secure financial stability in the face of economic uncertainties.

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