Mortgage Minute: Bank of Canada Rate Decision: Why a Cut is Still Likely Despite Inflation Spike (Oct 2025)

This week, Canadian economic data sent two completely different signals.

On one hand, a surprise inflation report confused the markets. On the other, the Bank of Canada’s own newly released data shows an economy where both businesses and consumers are bracing for a recession.

This has created a market of mixed signals, but for those who can read the data, the strategy is clear. The inflation spike is noise; the soft economy is the trend. This has created the best negotiating climate for Toronto home buyers that we have seen in years.

Here is a breakdown of what is happening and what it means for your mortgage.

The Inflation “Curveball”

Statistics Canada reported that headline inflation for September rose to 2.4%, up from 1.9% in August and higher than the 2.2% consensus forecast. This data immediately made the Bank of Canada’s (BoC) upcoming rate decision on October 29 “a bit more interesting,” according to one economist.

The Bank of Canada’s Own Reports Show a Weak Economy
 While the inflation number grabbed headlines, the BoC released its quarterly Business Outlook Survey and Survey of Consumer Expectations, which paint a much weaker picture.

• Businesses are Planning for Recession: The Business Outlook Survey shows firms’ outlooks remain “subdued”. Investment and hiring intentions are weak. Most importantly, the share of firms actively planning for a recession in Canada has increased to 33%.
• Consumers Expect a Recession: The Survey of Consumer Expectations was just as clear. It found that consumers see a “further deterioration in the labour market”. Reflecting this pessimism, about two-thirds of consumers now expect the Canadian economy to fall into a recession over the next 12 months.

Economist Consensus: A Rate Cut is Still Coming

This official data from the Bank of Canada strongly supports the opinion of CIBC’s Deputy Chief Economist, Benjamin Tal, who recently stated that Canada is in a “per capita recession” and the Ontario condo market “is in a recession”.

 This is why, despite the inflation spike, the consensus among major bank economists (including CIBC, RBC, and TD Bank) remains firm: they are still forecasting a 25-basis-point cut at the October 29 meeting. The weak underlying economy simply cannot withstand higher rates.

The Result: A “Tremendous Opportunity” for Buyer

This economic slowdown has a direct silver lining for home buyers: the return of negotiating power.

A RE/MAX Canada VP recently called the current climate a “tremendous opportunity” for first-time buyers. With less competition, the market is tilting in buyers’ favour. This is now appearing in the data: one report confirmed that housing affordability in Toronto improved in September, as the average home price fell by $9,400.

My Take: What This Means For Your Strategy

This is a market of mixed signals, but the strategy is clear. The inflation data is noise. The trend of a soft economy—now confirmed by the Bank of Canada’s own surveys—is the reality.

For buyers, this has created a rare and valuable window of opportunity.

• For First-Time Buyers: This is the moment you have been waiting for. Softer prices and less competition mean you can finally negotiate. The key is to be prepared. Before you look at listings, download our First-Time Home Buyer Guide to get your plan in place.
• For Professionals and Upsizers: This is a negotiator’s market. With the right preparation, you can make a strong, informed offer. The key is our “Underwritten Upfront” process, which builds a lender-ready file before you bid.
• For Current Homeowners: This market softness and a potential rate cut will impact your equity. To understand your new position, get a complimentary Home Report that tracks your property’s value and mortgage options.