Economists now overwhelmingly expect a Bank of Canada cut next week

Most economists now expect the Bank of Canada to cut its overnight rate by 25 basis points on September 17, with a Reuters poll showing consensus that weak job numbers and a slowing economy gave policymakers little alternative.

Nearly 80% of economists surveyed by Reuters between September 9 and 12 forecast a quarter-point reduction to 2.50%, with most anticipating at least one more cut before year-end.

Such a move would mark the Bank's first reduction for months, having kept its benchmark rate on hold over the summer as it weighed up the inflation outlook and threats to the economy posed by US president Donald Trump's trade war. 

That recent pause halted a cycle that saw it bring rates 225 basis points lower. But signs that the economy is weakening appear to have tilted the balance in favour of a cut next week: in August, the economy lost 65,500 jobs, pushing unemployment to its highest level in nine years outside the pandemic. Last quarter, GDP shrank by 1.6% due to U.S. tariffs on key exports, adding to calls for more rate cuts and weakening the Canadian dollar.

Inflation and global context weigh on decision

The Bank’s next move will also depend on inflation data due just a day before the decision. “The BoC also has the next set of inflation data to mull over, due the day before its announcement. Should there be further progress in the headline number – and any softening among the core metrics – that will further seal the deal for a cut,” Penelope Graham of Ratehub.ca said.

Canada’s overall inflation remains below the Bank of Canada’s 2% target, but core inflation is a bit higher. Graham warned that while another rate cut is possible in 2025 if the economy stays weak, the Bank is unlikely to move too quickly because core inflation is still elevated.

Desjardins Group economist Royce Mendes argued that inflation worries have been overstated by temporary factors, suggesting “it’s really time to move the inflation worries to the back burner and start focusing…on supporting the economy, with the unemployment rate near 7%.” Mendes flagged that markets may be underestimating the scope of future BoC cuts.

Market impact and borrower strategies

The anticipation of a rate cut has already pushed down bond yields and mortgage rates. “The growing pressure on the US Federal Reserve to cut rates has caused bond yields to drop, including north of the border; the Government of Canada five-year yield is now in the 2.7% range for the first time since May. This has put downward pressure on fixed m

Mortgage rates, with the lowest five-year term in Canada back below the 4% threshold,” Graham said.

Investment banking giant Morgan Stanley predicts Federal Reserve to have four straight 25-basis-point rate cuts at each of its three remaining meetings this year and once more in January.

With mortgage rates easing and home prices stagnant, buyers are seeing improved affordability. According to Ratehub.ca’s calculator, a homeowner with a 10% down payment on a $672,784 home and a 5-year variable rate of 3.95% would see their monthly payment drop by $84 if the Bank of Canada implements a 25-basis point cut, equivalent to a savings of $1,008 per year. 

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Why 'right-sizing' is often the best option for borrowers facing mortgage renewal pain

Plenty of homeowners are facing trying times across Canada as mortgages come up for renewal this year at much higher rates than they originally signed for during the pandemic-era lows.

That renewal wave has left many worried about the prospect of managing significantly steeper mortgage costs while also handling other payment and debt obligations – and some are scrambling into less-than-ideal borrowing solutions as a result.

But instead of having borrowers jeopardize their financial future further by doing anything they can to keep their current home, mortgage brokers have a responsibility to have hard conversations and see whether it might make sense for clients to “right-size,” according to a prominent Ontario broker.

Tracy Valko (pictured top), founder and CVO at Valko Financial, told Canadian Mortgage Professional that with many borrowers at renewal time seeing their home valued either at or below what they purchased for, refinance opportunities were thin on the ground.

“They’ve got too much debt. Could they manage it? Potentially, but I think they’re exhausted from having debt and managing it every day that they have to sell – and don’t want to sell,” she said. “I call it right-sizing to what your financial position is right now instead of downsizing.

“It’s a mindset for people who are already stressed: ‘Let’s talk about right-sizing to where you’re at right now with your income. Let’s alleviate all this debt by paying it off when you sell your home and then start again with a minimum downpayment – just a smaller home.’”

The fact that many markets have swung decisively into buyer’s territory, Valko added, is also giving those clients the ability to negotiate when choosing a new home, rather than getting locked into a bidding war and potentially having to overpay.

‘If you can start again and build up again… there’s nothing wrong with that’

The value of brokers at renewal time has come into clear focus once again this year with clients struggling for options. But she underlined the responsibilities also facing brokers to do the right thing for borrowers instead of focusing on their own bottom line.

“No one situation is the same as the next and we have to really understand our products and understand what’s in the best interest of the client – not just place them in a second mortgage at 18% or 15% and thinking that’s a good thing,” she said. “Sometimes selling and buying is the new refinance. Listen, I’ve had some hard conversations… and my heart goes out to them.

“But at the end of the day, I’m a big believer in homeownership and I also care about people first. And I sit there thinking that you can always start anew. But to sit in financial stress for another five years? That’s five years you can’t get back of your life, your health. And what’s the point if you can start again and then build up again? There’s nothing wrong with that.”

Understandably, staying in a home even during tough financial times is always a top priority for Canadians. But for Valko, there’s little point in setting a customer up with a lender on an exorbitant interest rate if it just means further hardship down the line.

“I don’t even understand how they’re getting them to qualify because it’s well over and above their debt service ratios,” she said. “But these clients are just going to sit and suffer, and I think there’ll be an end date for them on it because you can’t continue that way.

“We have to understand our first priority is what’s in the best interest of the client, not what’s in the best interest for how much income we’re making or the profits or the lender, or making sure that we reach our quotas on how many deals we send in. It’s what’s in the best interest of Canadians.”

Canadian Mortgage Summit fast approaching

Valko is set to chair a panel on how brokers can leverage artificial intelligence and automation in their business at the upcoming Canadian Mortgage Summit, scheduled for September 17 at Brampton’s Pearson Convention Centre.

She described that event – free to attend for brokers – as an invaluable way for the industry to gain insights into the best ways to navigate the current landscape and prepare for growth in 2026.

“It’s bringing the tools for what we really need to do to pivot our business into the end of this year and next year,” she said. “It’s bringing those key insights that we need to have and to educate ourselves so that we can have tighter policies and programs and market strategies for us as brokers and agents so that we can still survive and thrive in these challenging times.”

CMP

We hope you are finding our Blog informative and enjoyable to read while keeping you up to date with the ever changing real estate market. 

Please feel free to contact me via Direct/Text or e-mail at any time and my team will be pleased to assist you, family members and friends with all your real estate needs. Referrals are always welcome and rewarded!

What sharply falling lumber prices could mean for Canada's housing market

The recent slide in US lumber prices has caught the attention of industry watchers on both sides of the border, with many asking what this means for Canada’s housing market and mortgage sector.

While the Wall Street Journal reported a roughly 25% drop in lumber futures since early August, Canadian analysts and mortgage professionals are weighing the ripple effects for builders, homebuyers, and lenders.

Lumber’s warning sign and the Canadian context

Lumber prices have long been seen as a bellwether for the broader housing market. Lumber is often the canary in the coal mine for construction activity. When prices fall sharply, it’s usually a sign that demand is cooling or that supply is outpacing what builders need.

Russ Taylor, a wood market analyst, observed that the industry had broadly anticipated the new duties and prepared accordingly. However, Canadian mills—especially in Western Canada—may have overbuilt their inventories. With excess supply across the market and demand for lumber remaining subdued due to high interest rates, Taylor believes it could take a while for conditions to stabilize.

“It's going to take months before this all unwinds, because now you've got way too much inventory in the field,” he said. “You’ve got way too much inventory at the mills, and prices are so low that anybody selling today is totally offside in Canada,” he told Mortgage Professional America.

The US market’s volatility has been driven by a mix of trade uncertainty, fluctuating tariffs on Canadian softwood lumber, and a slowdown in American homebuilding. 

For Canadian builders, the impact is twofold. On one hand, lower lumber prices could ease construction costs, potentially making new homes more affordable. On the other, ongoing trade disputes and higher duties, recently raised to about 35% for most Canadian producers, continue to squeeze margins and create uncertainty.

Mortgage rates and homebuying outlook

The connection between lumber prices and mortgage rates is indirect but important. As construction costs fluctuate, so too does the pace of new home development, which can influence housing supply and, by extension, prices and borrowing demand.

Kevin Lee, chief executive officer of the Canadian Home Builders’ Association (CHBA), told Canadian Mortgage Professional in August that Canada’s homebuilding crisis could be more severe than it appears. He noted that current housing start figures are largely inflated by the construction of purpose-built rental units.

While builder sentiment in Ontario and British Columbia is weaker compared to the Prairies and Atlantic Canada, Lee indicated that the outlook for construction is deteriorating in other regions as well.

Early numbers from real estate boards pointed to increased home sales in Vancouver, Calgary, Edmonton, and Montreal. However, Calgary and Edmonton remained below last year’s activity levels, and Toronto’s momentum paused after several months of gains.

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We hope you are finding our Blog informative and enjoyable to read while keeping you up to date with the ever changing real estate market. 

Please feel free to contact me via Direct/Text or e-mail at any time and my team will be pleased to assist you, family members and friends with all your real estate needs. Referrals are always welcome and rewarded!

Is a big Bank of Canada rate cut on the way?

A further cooldown in Canada's labour market, reported last week for August, intensified speculation that the Bank of Canada could be about to cut interest rates in its next decision, scheduled for September 17. 

That Statistics Canada report revealed a loss of 66,000 jobs last month, following a 41,000 drop in July, as the national unemployment rate climbed by 7.1%. That marks the highest jobless rate outside the pandemic for nearly a decade, but economists still don't view a cut next week as a home run. 

The upcoming Consumer Price Index (CPI) release on September 16, just before the next BoC meeting, remained a key variable. “Another softer inflation print could raise odds for additional easing relative to our current base case that assumes the BoC has already reached the end of the cycle,” Royal Bank of Canada (RBC) senior economist Claire Fan said.

BMO’s Sal Guatieri wrote, “Stubborn core inflation sets a high bar for another Bank of Canada rate cut, reducing the odds of a move on September 17.” He added that if future job and inflation reports remain subdued, the Bank could ease in October, eventually taking the policy rate down 75 basis points to 2.0% before next spring.

TD economist Rishi Sondhi argued that “domestic demand looks to have surprised on the upside. On the margin this could enhance the argument for the Bank to stand pat on rates at their September 17 meeting.” However, CIBC’s Andrew Grantham said, “We continue to think that a couple more interest rate cuts from the Bank of Canada are needed to accelerate the recovery, and assuming no fireworks in next week’s LFS figures, we forecast the first of those being delivered at the upcoming September meeting.”

Labour market weakens as trade war bites

The trade war’s impact has been especially pronounced in manufacturing, which shed 58,100 jobs over the past seven months. Professional, scientific, and technical services lost 26,000 positions in August alone. Ontario, British Columbia, and Alberta saw the largest regional job losses, while Quebec remained stable.

“Southern Ontario cities continue to shoulder the nation’s highest unemployment rates, with Windsor (11.1%), Oshawa (9.0%), and Toronto (8.9%) bearing the brunt of trade war impact,” Fan said.

Inflation concerns linger, but market expects easing

While Canada’s overall inflation rate remains below the BoC’s 2% goal, the underlying rate is tracking “moderately above the target,” Guatieri said. Desjardins Group economist Royce Mendes argued that inflation worries have been overstated by temporary factors, suggesting “it’s really time to move the inflation worries to the back burner and start focusing…on supporting the economy, with the unemployment rate near 7%.” Mendes flagged that markets may be underestimating the scope of future BoC cuts.

Despite the negative headlines, some fundamentals remain resilient. Fan noted, “We don’t expect that will spread and cause a sharp, broad-based contraction,” citing healthy domestic consumer spending and Canada’s relatively low average tariff rate under CUSMA.

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We hope you are finding our Blog informative and enjoyable to read while keeping you up to date with the ever changing real estate market. 

Please feel free to contact me via Direct/Text or e-mail at any time and my team will be pleased to assist you, family members and friends with all your real estate needs. Referrals are always welcome and rewarded!

Canadian job losses mount, boosting odds of Bank of Canada rate cut

Canada’s labour market took another hit in August, intensifying calls for the Bank of Canada to consider further interest rate cuts as the trade war continued to take its toll on the economy. 

Statistics Canada said on Friday that the economy shed 66,000 jobs last month, compounding a 41,000 decline in July, in a new sign that the economy and jobs outlook are weakening.

The trade war’s impact on manufacturing and other exposed sectors has been pronounced, and the latest employment report “fully reinforces any bias for the BoC to ease somewhat further here,” said Doug Porter, chief economist and managing director at CFA. Still, a September cut isn't a certainty, he cautioned."Inflation hasn’t quite given them the all-clear.”

Unemployment at decade high

The national unemployment rate climbed to 7.1% in August, its highest level outside the pandemic in nearly a decade. Most of the job losses were part-time, but the brunt was felt in core-age employment, with a 93,000 decline among those aged 25 to 54.

Regionally, Ontario (-26,000 jobs), B.C. (-16,000), and Alberta (-14,000) saw the largest drops, while Quebec remained stable.

“Southern Ontario cities continue to shoulder the nation’s highest unemployment rates, with Windsor (11.1%), Oshawa (9.0%), and Toronto (8.9%) bearing the brunt of trade war impact,” said Claire Fan, a senior economist at the Royal Bank of Canada.

Trade war and inflation loom large

The trade war’s toll is evident, with manufacturing losing 58,100 jobs over seven months and professional, scientific, and technical services shedding 26,000 positions in August alone.

Porter said the upcoming Consumer Price Index (CPI) release on September 16—just before the next BoC meeting—remained a key variable as the central bank weighs up a possible reduction. “Another softer inflation print could raise odds for additional easing relative to our current base case that assumes the BoC has already reached the end of the cycle,” Fan said.

Economic resilience

Despite the negative headlines, some underlying fundamentals remain resilient. “We don’t expect that will spread and cause a sharp, broad-based contraction,” Fan noted, pointing to Canada’s relatively low average tariff rate under CUSMA and healthy domestic consumer spending.

CMP

We hope you are finding our Blog informative and enjoyable to read while keeping you up to date with the ever changing real estate market. 

Please feel free to contact me via Direct/Text or e-mail at any time and my team will be pleased to assist you, family members and friends with all your real estate needs. Referrals are always welcome and rewarded!