Mortgage Minute – August 1, 2025
This week in the mortgage world was a tale of two distinct stories. The Bank of Canada did exactly what the market expected: it held its key interest rate steady. But the most significant news for Canadian mortgage shoppers came Friday morning from south of the border, and it could change the game for anyone considering a fixed-rate mortgage.
U.S. Jobs Report Shakes the Market
The big story on Friday was the surprisingly weak U.S. jobs report. Nonfarm payrolls for July rose by only 73,000, which was well below the 110,000 that economists had anticipated. The real shock, however, was in the revisions to previous months. The job numbers for May and June were revised down by a staggering 258,000 combined. This suggests the U.S. economy is cooling much more rapidly than previously believed.
The Ripple Effect: Canadian Bond Yields Tumble
Why does a U.S. jobs report matter for your mortgage in Toronto? It’s all about the ripple effect. Bad economic news from a major economy like the U.S. often causes investors to move their money into the safety of government bonds. This increased demand pushes bond prices up and their yields down.
That’s exactly what we saw happen. In response to the weak jobs data, the Government of Canada 5-year bond yield, the primary benchmark lenders use to price their fixed-rate mortgages, dropped back below 3% on Friday morning. For context, the yield had remained above 3% for the entire month of July.
Meanwhile, the Bank of Canada Remains on the Sidelines
While the fixed-rate landscape was shifting, variable rates held steady. On Wednesday, the Bank of Canada kept its policy rate at 2.75%, meaning there are no immediate changes for variable-rate mortgages or home equity lines of credit (HELOCs).
The Bank’s decision to wait comes from our own mixed economic signals here at home. Canada’s GDP declined by 0.1% in May, but preliminary data shows a potential 0.1% rebound in June. This has created a disconnect between Statistics Canada, which views the second quarter as “essentially unchanged,” and the Bank of Canada’s own forecast of a 1.5% economic contraction for the same period. With such uncertainty, the Bank is in a holding pattern.
What This Means for Your Mortgage Strategy
This week is a perfect example of how global events can directly impact your financial decisions. While variable rates are stable because our own central bank is taking a cautious, wait-and-see approach, the real story is the potential for better fixed-rate pricing.
The drop in the 5-year bond yield is the first signal that lower fixed rates could be on the horizon. This doesn’t mean lenders will slash their rates tomorrow, but it puts downward pressure on them. For homebuyers and for homeowners with renewals approaching, this could create a valuable, and possibly brief, window of opportunity to lock in a favourable rate.
In a volatile market, these signals are crucial. If you’re buying a home or have a renewal on the horizon, this could be a key moment. Let’s connect to analyze your specific situation and determine if acting now is the right strategic move for you.
Sources:
- “Re: US Job Numbers,” RMG Mortgages, August 1, 2025.
- “Latest central bank decision sees no relief for mortgage borrowers,” Canadian Mortgage Professional, July 31, 2025.
- “Bank of Canada leaves rates unchanged but flags potential case for future cuts,” Canadian Mortgage Trends, July 30, 2025.
- “Canadian economy slows once again,” Canadian Mortgage Professional, August 1, 2025.
- “Economic softness continues as Canada posts second monthly GDP decline,” Canadian Mortgage Trends, July 31, 2025.