this post was submitted on 29 Oct 2026
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Of course, right as I'm shopping for a mortgage.
Just bought a place on variable two months ago. Off to a good start!
FWIW, I think variable was the right choice for you. My term is up soon, and we're going variable.
Over investment in AI is unsustainable. There's no path to profitability for the industry. There is going to be a major market correction soon—and it must be soon because the increasing costs of investment are burning through capital at an unsustainable rate.
This will directly put downward pressure on rates, as liquidity rapidly contracts as the circular investments in AI suddenly collapse.
And also indirectly, as a major driver of BoC rates is inflation, and one driver of inflation is chip prices exploding due to AI.
And also indirectly from stock market wealth losses: when investment valuations collapse, that reduces wealth, which in turn puts downward pressure on the housing/construction/materials markets (b/c affordability drops) and, hence, inflationary pressure from those industries.
And then, even more indirectly, the US will be in a politically untenable situation wrt their very expensive war of aggression triggering energy price spikes during a crash and recession. They will be forced to back down, which should stabilize energy prices.
So, I think you'll do very well on variable, even if it rises a bit in the short term.
Is the AI bubble anything like the housing bubble? Because I've been waiting for that to pop for 20 years.
No, it's not. Housing doesn't require much to sustain value, while AI valuations require the market to continue to believe it is a "growth industry", which means it will have explosive, exponential profit growth in the future. That is not possible, and the longer the market remains irrational, the more expensive it becomes.
Housing is, literally, unique. Every home is brought to market independently, and homeowners are unwilling to accept a lower price, so they sit on inventory.
There is also a lot of political pressure from homeowners to sustain valuations, especially from aging homeowners who are depending on the home valuations to fund retirement. And this is the demographic that votes.
vs. AI: in the coming months, when OpenAI, Anthropic, or any other smaller player needs to pay $billions to a supplier or default, and they can't raise more capital, they instantly go bankrupt. Then the whole house of cards comes tumbling down.
and those companies have no assets. They are worthless.
I do admire your optimism, but a couple knits to pick.
Real estate in Canada has been a growth industry since we decided that 0 or near-0 interest rates were the way of the land. That's why we've been in a housing crisis for 20 years.
Assume you're right and Anthropic and OpenAI both go bankrupt. Microsoft has its own AI. Nvidia has its own. Canada's government just bought into Cohere. Google has its own. Apple will have its own if it doesn't already. Amazon has its own. Assuming the AI bubble pops, maybe one or two of the big boys fail. What more than likely happens instead or also is the survivors get a lot bigger than they are.
I didn't address your point about housing. You're right that low interest rates have exacerbated the problem, but the bigger upstream causes are more that:
To be affordable, housing needs to drop 50%. Interest rates being low contribute, on the margin, but don't account for that big of a difference. You'll notice that housing prices barely dropped at all, and even continued to rise in some areas, when rates skyrocketed 4 years ago.
It's never actually been done, so we don't know that. Even Singh didn't run on reducing housing prices last year.
Speaking as someone who currently rents an apartment, if I can ever get to a point where I can own something, I sure as hell don't want to own one. The only thing worse than renting your individual unit is owning your individual unit and fighting with the other individual owners about maintaining the common areas.
And the non-market housing that does exist is in such disrepair that you couldn't pay me to live in it. Because in this country, non-market housing means controlled by the government, and that's a political football.
Which is why I said it's a growth industry. They bought low. They're not about to sell lower.
Canada's population also skyrocketed 4 years ago, and only stopped skyrocketting (at least, as much) in the last year or so. There were two different demand levers being pulled. BoC pulled theirs to reduce, GoC pulled theirs to increase.
No. No, they won't. They're all losing money hand-over-fist. And they're all circularly invested with each other. Microsoft owns OpenAI, and OpenAI uses Microsoft compute which they pay for with ownership. Microsoft valuation is inflated because of OpenAI, and when the bubble bursts, they're going to lose a lot of money.
If you're interested in economics/finance, I suggest reading about the circular cashflows and investment in the AI space.
To make it even worse, they're effectively lying in their accounting, claiming the compute they're giving away as a "marketing expense" instead of operating costs, while booking the value as revenue. The profit : cost ratio is even worse than headline numbers suggest. They are burning through multiples of all of their revenue on operating costs, before they even start to pay for expansion.
In other words, it's fucked.
Sure, AI is here to stay—small to midsize models are already trained and cheap to run. But it's also not going to make significant profit for anyone.
Like I said. I admire your optimism. But I think you need to fact-check yourself. Microsoft owns at most 27% of OpenAI. And Microsoft is currently working on its own internal AI (MAI). Even in the unlikely event that OpenAI goes bankrupt, Microsoft and its own AI products will be just fine.
I know that, yes. But it's relevant to my point: AI costs more to train and run than its value. That Microsoft, Google, Meta, OpenAI, Anthropic, SpaceX and hundreds of smaller players are all losing money at the same game just makes the problem worse.
There is no path to profitability for AI.
The cashflows needed to pay back investment to date is already impossible, and it's scheduled to accelerate.
And Microsoft being tied to OpenAI is largely about continuing their "growth story" to justify their valuation. The "value" of their ownership stake, even as huge as it is, is largely irrelevant; once the house comes tumbling down, it's going to be a very long path to recovery for anyone involved in AI. They will write off many billions and be responsible for many times that in evaluated paper wealth.
Google, Meta, and Microsoft will all be fine, eventually. They have enough stable revenue streams outside of AI to weather the storm, most likely (I'm not sure how leveraged they are, but with string cashflows, I imagine they'll survive.)
Musk's pile of companies are dicey. OpenAI and Anthropic won't meaningfully exist in 5 years.
So, I'm pretty confident that a variable rate mortgage is the right choice right now. But even if you aren't as doom and gloom, it seems pretty clear that signing a 5-year fixed right now is unlikely to be a good idea.
Like I said, I admire your optimism.
And signing a 5-year fixed is almost always a good idea. Remember when Tif said rates would be low for a long time? I'd have absolutely signed fixed then. The odds are greater my financial situation improves in 5 years than in 1. I like knowing what I'll be paying in October of next year. Variable means I don't even know what I'm paying in January of next year.
AFAIK, variable interest rate mortgages only require payment increases if rates rise high enough to no longer cover interest payments.
Anyway, I hope you're right. As confident as I am in a pending financial disaster, it would be great for everyone if that doesn't happen!
You're close. You're thinking Fixed-Rate variable. And the flip side of that is if you hit your trigger rate and your payments increase, they won't decrease again until you renew. So when interest rates go up, you're watching the BoC to see by how much and then doing the math - either that, or you're surprised when your mortgage payment increases. But when interest rates go down, you're basically on a fixed mortgage.
The other one is Adjustable-Rate variable, and that one follows the interest rate up and down more closely. BoC raises, your payments rise. BoC drops, your payments drop.
Neither is long-term better than a fixed mortgage, which is why that's what 60-70% of mortgages in Canada are.
I just had to renew mine. Literally just before it was going up thankfully.
Better you than me. I'm busy trying to afford rent.
Higher rates make layoffs more likely which hits them, you and me. Assuming you both work for an employer. :D
Between interest rates, the US, and everyone in a panic about AI, I just assume my job's a goner. And if it's gonna be a goner anyway, crank 'em.
Stop eating the green potatoes.
They don't sell those in my country
I'm 2 months til renewal 💀💀💀
Should've gone the Pleb route like half the population.
Mortgage rates don't affect you if you can't even afford to become a part of "homeowner" class.
We'll own nothing and serve the oligarchs that own and control Canada:)
did you lock in a rate yet?
I'm renewing in six months and I'm getting fixed for 3 years.
I wouldn't do that, if you care. See my comment above for my reasoning. Variable is the right choice right now, imho.
Hopefully the principle should go down a bit, but it’ll be negligible as people only go by the monthly payment