April’s Inflation Numbers: Why the Bank of Canada Is Now in a Tough Spot

April’s inflation numbers just landed, and at first glance, they seem like a breath of fresh air for Canadians: overall inflation cooled to 1.7% year-over-year, down from 2.3% in March. What’s behind the drop? A steep decline in energy prices — especially gas, which tumbled more than 18% compared to last year. The removal of the carbon tax played a big part in this shift.

But if you peel back the layers, the picture isn’t quite so rosy.

Take energy out of the equation, and inflation actually ticks up to 2.9%. That means the cost of living for most Canadians is still rising, especially when it comes to essentials. Grocery prices are up 3.8%, and dining out costs 3.6% more than it did a year ago. Travel and other everyday expenses are also climbing.

More concerning for the Bank of Canada? Core inflation — the measure they watch most closely — is moving in the wrong direction:

The trimmed mean is now 3.1%
The median rate has climbed to 3.2%
The 3-month average is running at 3.4%
That’s above the Bank’s 1–3% target range, and it’s exactly the kind of data that keeps interest rates higher for longer.

Other Notable Trends:

Beef prices are up 16.2%
Coffee and tea are up 13.4%
Auto insurance jumped to a 7.7% annual increase
Vehicle prices are climbing again, after dipping last year
Rent costs ticked back up to 5.2%, even as mortgage interest eased slightly
So, while headline inflation looks like it’s cooling, the underlying pressures remain stubborn. This puts the Bank of Canada in a tough spot: Should they start cutting rates to help home buyers and mortgage seekers, or hold steady to keep inflation in check?

Home buyers and anyone looking for a mortgage are watching closely. If you’re hoping for lower rates, the mixed signals in this report mean patience may be needed. The Bank of Canada’s next moves could shape the housing market for months to come.

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One of the most important things I do — whether you’re buying your first home, refinancing, or renewing — is help you make informed, confident decisions about not only your property, but also your mortgage options. A key part of that is understanding why mortgage rates move the way they do.

Here’s a simple breakdown of what really drives fixed and variable mortgage rates in Canada, and how you can monitor them like a pro.

🔍 What Influences Mortgage Rates?

✔ Variable Mortgage Rates
These are tied to the Bank of Canada’s overnight rate. Right now, that rate is 2.75%, and banks typically add about 2.45% to it, which gives you the prime rate (currently ~5.20%).
Lenders often offer a discount off prime — for example, prime minus 1% — which brings your mortgage rate into the low 4% range.

✔ Fixed Mortgage Rates
Fixed rates are based on Government of Canada bond yields, especially the 5-year bond yield.
As of today, the 5-year yield is 2.98%, and lenders usually add a margin of 1.2% to 1.6% to that to cover their costs and profit — so you can expect 5-year fixed mortgage rates around 4.2% to 4.6%.

💡 A Look Behind the Curtain: How Much Do Lenders Make?

If a lender offers you a 5-year fixed rate at 4.09%, but their cost of funds is 2.89%, they’re making a spread of about 1.20% per year.

Over a 5-year term on a $500,000 mortgage, this could translate into around $18,400 in profit — assuming you hold the mortgage to maturity.

🛠 How to Monitor the Key Rates Yourself:

Bank of Canada Overnight Rate (affects variable rates):
➤ https://www.bankofcanada.ca/core-functions/monetary-policy/key-interest-rate/

5-Year Government of Canada Bond Yield (affects fixed rates):
➤ https://www.bankofcanada.ca/rates/interest-rates/lookup-bond-yields/

Watching these two numbers can help you spot trends and feel more prepared when you’re making mortgage decisions — especially in this shifting rate environment.

If you’d like me to walk you through current mortgage options — or how these indicators might affect your situation — just call me anytime 905-399-4269.

I’m here to simplify the process and help you get the best outcome possible.