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A real estate sign is pictured in Vancouver on June 12, 2018.Jonathan Hayward/The Canadian Press

When it comes to mortgage rates lately, no change is good change.

Borrowing costs have ridden an uptrend since May, but none of Canada’s leading nationally-advertised mortgage rates went up this week. That’s the good news.

But now it’s about to get real, or at least, more real.

While central banks have made ample progress on inflation—as witnessed by Thursday’s mostly constructive 3.2 per cent U.S CPI reading—it could get dicey in the weeks ahead.

Core inflation isn’t backing down quickly enough, and oil prices are surging. High energy prices could combine with weak monthly inflation data from one year ago (what economists call “base effects”) to threaten higher annualized inflation for the next few months.

That raises the chance that Canada’s prime rate sticks at or above 7.20 per cent for longer than mortgagors had hoped.

The bond market still sees rates falling within a year or so, according to the CORRA forecast curve published by CanDeal DNA, but disappointing inflation and overly cheerful job numbers could push out the first Bank of Canada rate cut.

Either way, it makes little sense for all but the most risk-averse to lock into a long-term loan at today’s rates. Certainly, the BoC could rain on the housing parade with more hikes, but damage to the economy is mounting, and borrowers can’t take much more of this.

For that reason, three-year fixed terms—which have been flying off the shelves—are about as long as a well-qualified borrower should commit to.

As for floating-rate mortgages, they’re currently as popular as a rainstorm at a picnic, but they could become the next summer hit if the BoC cues up 2024 rate cuts as expected.

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