Keeping You Informed
Trade Tensions Grow, But Rates Hold Steady
It’s been another “bad news is good news” month for borrowers. Canada’s economy continues to feel the effects of U.S. tariffs and slowing exports, but that weakness is helping keep borrowing costs down.
In August, manufacturing sales fell 1.0% and wholesale sales dropped 1.2%, the first declines in months. The federal government announced new support for the lumber sector, while Stellantis confirmed plans to close its Brampton, Ontario plant and move production to the U.S.
Markets now see a 60%+ chance of another 0.25% rate cut at the October 29 Bank of Canada meeting, which would lower the overnight rate to 2.25%, the lowest since early 2024.
Mortgage Rate Outlook
Bond and swap yields continue to edge lower, good news for fixed mortgage rates.
- 5-year bond yield: ↓ 3 bps
- 4-year swap rate: ↓ 2 bps (a five-month low)
- 5-year CMB: ↓ 3 bps
If funding costs stay stable, lenders could start trimming fixed rates slightly.
Variable-rate clients will benefit directly if another Bank of Canada cut lands this month.
Economic Snapshot
Canada narrowly avoided a technical recession this summer. GDP fell 0.4% in Q2, rose 0.2% in July, and was flat in August.
The unemployment rate sits at 7.1%, the highest since 2016 (excluding the pandemic). Job losses are mostly in manufacturing, transport, and warehousing, though the service sector is starting to cool as well.
Economists expect little to no GDP growth for the rest of 2025, but inflation remains stable, around 2.1% in 2025 and 2.4% in 2026, comfortably within the Bank of Canada’s target range.
What’s Coming Up
- Federal Budget – November 4: New spending on housing, energy, and infrastructure could support activity despite talk of restraint.
- Trade Policy: The ongoing tariff war remains a wildcard. A possible USMCA renegotiation in 2026 could boost exports and manufacturing.
- Global Tensions: Rising oil prices or conflicts could stall future rate cuts.
- Housing Demand: Slower immigration may cool demand slightly, but Canada’s housing shortage remains significant.
Broker Focus: The Renewal Mirage
For the past year, brokers have heard about an upcoming “renewal wave.” But in reality, waiting for renewals is a losing strategy.
By the time a client’s term ends, most lenders have already reached out and often secured renewals with special offers. Big banks have the advantage, direct access, deep pockets, and the ability to undercut your best rate.
Where the Real Opportunity Lies
The real opportunity is mid-cycle, long before renewal.
That’s when life changes, a new baby, a renovation, a move, create reasons for homeowners to re-evaluate their mortgage. Most clients don’t realize when they can leverage equity, refinance for savings, or upgrade homes. That’s where proactive brokers step in.
Instead of sending generic emails or birthday notes, offer personalized, data-driven insights that show clients exactly how they can benefit in today’s market.
Bottom Line
The “renewal boom” isn’t where the gold is.
The real value lies in your existing clients, those who already trust you. Stay connected, provide useful insights, and you’ll uncover opportunities others miss.
By being proactive between renewals, you’ll build stronger relationships and steady business, no matter what the market does next.
