If you’ve been trying to figure out where mortgage rates are headed, welcome to the club.

Right now, the economic signals aren’t exactly pointing in one direction.

Canada just posted a surprisingly strong employment report. The U.S. posted a surprisingly weak one. Oil is back above $80 a barrel. Inflation remains a concern. And Canada’s 5-year bond yield—which I watch closely for clues about fixed mortgage rates—is back above 3.3%.

Put all of that together and the outlook for Canadian mortgage rates has become a little more complicated.

So, rather than trying to predict the future, let’s talk about what these numbers actually mean for Canadian homeowners and homebuyers.

Canada Had a Very Good Month for Jobs

Let’s start with some positive news.

Canada added approximately 75,000 jobs in July, far exceeding expectations. The unemployment rate declined to 6.4%, and labour-force participation improved as well.

Even better, this wasn’t entirely driven by government hiring. Private-sector employment showed strength, with gains in areas including construction, finance and real estate, professional services, and wholesale and retail trade.

Ontario and British Columbia posted particularly strong employment gains, with Manitoba and Nova Scotia also adding jobs.

Looking beyond one month, Canada added approximately 181,000 jobs from May through July.

Considering all the economic uncertainty Canadians have dealt with over the past year, that’s an encouraging sign.

Our economy certainly isn’t without challenges, but Canadians and Canadian businesses continue to demonstrate resilience.

Unfortunately, Good Economic News Doesn’t Always Mean Lower Rates

Here’s where mortgage economics gets a little backwards.

A stronger Canadian economy is obviously something we should welcome.

But the Bank of Canada is also trying to keep inflation under control.

If employment remains strong, consumer spending holds up and economic growth continues improving, the Bank has less reason to lower interest rates—and eventually may have reason to think about moving in the other direction.

That doesn’t mean a Bank of Canada rate increase is around the corner.

It simply means the economic argument for substantially lower rates becomes harder to make when the economy is performing better than expected.

The U.S. Is Sending a Very Different Message

South of the border, the latest employment numbers weren’t nearly as encouraging.

The U.S. lost approximately 23,000 jobs in July, while employment estimates for the previous two months were revised lower.

Labour-force participation also continued to decline.

That’s a meaningful change because the U.S. Federal Reserve has been dealing with its own inflation problem.

Until recently, markets were increasingly worried that the Fed might have to raise rates again.

A weakening labour market changes that calculation.

If the U.S. economy is slowing, the Fed has to be more careful about raising rates—even if inflation remains above its comfort zone.

For interest-rate markets, weak U.S. employment data can actually be helpful.

But there’s another problem.

Oil Is Back in the Conversation

Oil has moved back above $80 per barrel, largely because of geopolitical uncertainty and concerns about global supply.

For Canada, oil is always an interesting economic story because we’re a major energy producer.

But from an interest-rate perspective, I’m watching it for another reason:

inflation.

Higher energy costs have a habit of finding their way into everything else. Transportation becomes more expensive. Producing and delivering goods becomes more expensive. Businesses eventually have to decide how much of those increased costs they can absorb and how much gets passed along to consumers.

If higher oil prices are temporary, the inflation impact may be limited.

If they persist, central banks have another problem to deal with.

And Then There’s the Bond Market

This is the piece I think mortgage borrowers often miss.

Most Canadians understandably watch the Bank of Canada and assume mortgage rates simply follow whatever the Bank announces.

That’s much more relevant to variable-rate mortgages.

Fixed mortgage rates are heavily influenced by the bond market.

One benchmark I follow particularly closely is the Government of Canada 5-year bond yield.

This week it has moved back above 3.3%.

When that yield moves higher and stays there, lenders can face pressure to increase fixed mortgage rates. When it moves lower and remains there, we can eventually see opportunities for fixed rates to improve.

So while the Bank of Canada may not be doing anything today, the bond market certainly is.

Inflation May Be the Tiebreaker

We now have an interesting situation.

Canada’s employment numbers say the economy may be stronger than expected.

U.S. employment numbers say their economy may be weaker than expected.

Higher oil prices say inflation risks haven’t disappeared.

The bond market is trying to price all three at once.

That’s why the upcoming inflation reports in both countries are going to be particularly important.

If inflation comes in softer than expected, bond markets could breathe a little easier.

If inflation surprises to the upside—especially with oil already elevated—the interest-rate conversation could change quickly.

As I sometimes say, lower inflation would be gooder.

I’m fairly certain that’s an official economic term.

What Does This Mean If You Have a Mortgage?

This is where I think we need to separate economic entertainment from mortgage planning.

Trying to predict every move in interest rates can become a full-time job.

And even the professionals get it wrong.

Your mortgage strategy shouldn’t depend on correctly predicting what oil, inflation, the Bank of Canada or the bond market will do next.

It should depend on your circumstances.

How long are you likely to stay in the property?

How comfortable are you with payment changes?

How important is flexibility?

Could you need to break the mortgage before maturity?

Are you renewing soon?

Are you planning to move?

Those questions are generally much more important than trying to guess whether rates will be 20 basis points higher or lower a few months from now.

If You’re Renewing, Start Early

One group I think should be paying particularly close attention right now is Canadians with mortgages renewing over the next several months.

Don’t assume your existing lender’s first offer is automatically your best option.

And don’t wait until the last minute.

Starting the conversation early gives us time to compare lenders, look at fixed versus variable options, review your overall financial picture and decide whether it makes sense to secure something while continuing to monitor the market.

Sometimes the best decision is taking a rate.

Sometimes it’s waiting.

Sometimes it’s restructuring completely.

The important thing is having choices.

Canada Continues to Surprise

There’s plenty to worry about in the global economy right now. Trade uncertainty remains. Geopolitical risks remain. Inflation isn’t completely defeated.

But Canada’s latest employment numbers also remind us not to underestimate our economy.

We’ve absorbed a lot over the last few years, and Canadian households and businesses continue to adjust.

That doesn’t mean everything is perfect.

It does mean the Canadian economy may be proving more resilient than some of the headlines suggest.

And that’s something worth celebrating.

My Takeaway

If you’re waiting for one economic report to tell you exactly where mortgage rates are going next, you may be waiting a while.

Right now, the signals are mixed.

Strong Canadian employment could keep pressure on rates.

Weak U.S. employment could take some pressure off.

Higher oil prices could add inflation pressure back into the equation.

And the bond market will keep changing its mind as new information arrives.

That’s why I’m less interested in predicting the next headline and more interested in helping clients build a mortgage strategy that can handle more than one possible outcome.

If you’re buying a home, approaching renewal or considering a refinance, reach out. I’m happy to look at the numbers with you and talk through the options before you need to make a decision.

And if you’re a Realtor, financial planner, accountant or other industry professional, I’m always available as a resource for your clients. They don’t need to become bond traders or economists—they just need someone who can translate what’s happening into what it means for their mortgage.

A Little Credit Where It’s Due

A shout-out to Bruno Valko, whose recent market commentary got me thinking about the relationship between oil, geopolitics and Canadian bond yields, and Dr. Sherry Cooper, Chief Economist at Dominion Lending Centres, whose analysis of the latest employment numbers helped inform my thinking for this post.

They provided some of the inspiration and economic homework.

The mortgage interpretation—and any bad jokes—are mine.