Mortgage Minute: August 29, 2025
This morning, Statistics Canada delivered news that has significant implications for every homeowner and potential buyer in Toronto: Canada’s national economy regressed in the second quarter of 2025. This confirmation of a weakening economy immediately sent ripples through financial markets, dramatically shifting expectations for the Bank of Canada’s upcoming interest rate decision on September 17.
For anyone with a mortgage or thinking of buying a home, this isn’t just abstract economic news. It directly impacts your borrowing costs, your monthly payments, and the strategy you should employ. Here’s a practical breakdown of what happened and what it means for you.
Economy Contracts, Rate Cut Odds Jump to 55%
The primary driver behind the economic contraction appears to be the ongoing trade tensions with the United States, which have pummeled Canada’s growth outlook. In a direct response to this data, financial markets have now priced in a 55% probability that the Bank of Canada will cut its overnight interest rate in September, a significant jump from the 40% chance forecasted earlier in the week.
A rate cut would provide immediate relief to borrowers with variable-rate mortgages and could put downward pressure on fixed rates. However, economists remain divided. Some point to surprisingly strong consumer spending and residential investment as reasons the Bank might hold steady, while others argue a rate cut is now essential to avoid a recession.
The Borrower’s Dilemma: Stability vs. Opportunity
This economic uncertainty is creating a “flight to safety” among homeowners. In the face of volatility, we are seeing many renewing borrowers prioritize the “peace of mind” and payment stability offered by fixed-rate mortgages.
This cautious approach is fueled by tangible financial stress. A recent TransUnion study revealed that more than one in four Canadians (27%) are unable to pay all their bills and loans in full, with widespread concern over a potential recession. For many families, knowing their single largest expense is locked in provides invaluable security.
The Loyalty Trap: Why You Must Shop Your Renewal
One of the costliest assumptions a homeowner can make is that their current bank will reward their loyalty with the best possible rate at renewal. This is often not the case. We are seeing a trend where banks, when presented with a better rate from a competitor, are simply telling clients to “Take it or leave it”.
Blindly accepting the first offer your bank sends you can cost you thousands of dollars over your next term. A thorough market analysis is critical to ensure you are securing the best possible terms.
Your Strategy in This Market
The news of a shrinking economy makes a September rate cut a real possibility, but it also signals risk. Whether you are purchasing, refinancing to access equity, or renewing your mortgage, a passive approach is not an option. You need a clear, credible strategy that weighs the opportunity of lower rates against the need for financial stability.
If you want to create a practical plan for your mortgage that accounts for this week’s news, let’s connect for a confidential scenario analysis.
Sources:
- “Chances of September BoC rate cut rise after economy weakens in Q2,” Canadian Mortgage Professional, August 29, 2025.
- “Residential Market Commentary -Inflation eases slightly,” First National Financial LP, August 25, 2025.
- “Canadian firms are absorbing tariff costs, keeping lid on inflation,” Canadian Mortgage Trends, August 28, 2025.
- “BoC rate cuts still likely despite inflation concerns, says Desjardins’ Mendes,” Canadian Mortgage Professional, August 28, 2025.
- “Borrowers gravitating towards fixed mortgage rates at renewal for peace of mind,” Canadian Mortgage Professional, August 21, 2025.
- “Banks aren’t always matching lowest renewal rates despite popular belief,” Canadian Mortgage Professional, August 27, 2025.