It looks like the Bank of Canada is almost certain to cut interest rates this month. Markets are now betting with about 90% certainty that we’ll see at least a quarter-point cut on September 17th.
Why? The latest jobs numbers have come in rough.
- Canada lost 65,500 jobs in August, the worst monthly drop since early 2022.
- Most of those losses were in part-time work but some full-time jobs disappeared as well.
- The unemployment rate has climbed to over 7.0%, the highest (outside the COVID years) since 2016.
- Wages are not really growing fast enough to keep up.
The U.S. also saw weaker job growth than expected which adds more pressure on central banks to bring the rates down. Both the Bank of Canada, and the U.S. Federal Reserve meet on the same day this month, and odds are high that both will cut rates.
What This Means for Fixed Mortgages
Bond yields, which heavily influence mortgage rates, dropped right after the jobs data came out. Canada’s 5-year bond yield (the one tied closely to fixed mortgage rates) fell to its lowest level since June, currently at 2.844% at the time of writing this blog. Lower yields usually mean lower fixed mortgage rates are on the way. We have not seen any lenders cut rates as of today, but there could be a chance that we do.
If the Bank of Canada does cut, that’s also good news for variable-rate mortgages; payments could start easing a bit.
For those holding an adjustable rate mortgage, your payments could decrease, and for those holding a regular variable rate mortgage, more of your payments will go towards principal vs interest(but your payment amount will not change).
For those wanting to wait till the Bank of Canada announcement to see what happens with fixed rates, keep in mind that the fixed rates move in conjunction to the bond yields primarily, not the overnight rate. The rate cuts by the Bank of Canada will only directly effect variable rates, whereas fixed rates can move up and down at any time due to the bond yields. If you were going to take a fixed rate anyway, and are waiting till September 17th to see if fixed rates drop further, there is no reason to do so,
The Bottom Line
The job market is softening, the economy’s slowing, and inflation pressures are cooling off. All signs point to the Bank of Canada making borrowing cheaper to help stimulate things.
For homeowners and buyers, this could mean:
✅ Variable-rate mortgages could finally get some relief
✅ More affordability in the housing market compared to earlier this year
