Chances of a September Rate Cut Keep Climbing

Forecasts are always shifting as new data rolls in. Earlier in August, signs pointed to another Bank of Canada hold on September 17, the next scheduled announcement. Market-implied odds of a cut were just 13%, suggesting a fourth straight pause. Since then, momentum has flipped: each fresh release has nudged expectations toward a September move, and the probability has climbed steadily.Here are the key data points from the past month that pushed the odds higher:

• U.S. jobs report – August 1: The report confirmed 289,000 fewer jobs than expected, pushing cut odds from 13% → 23%.

• Canada jobs report– August 8: Instead of the +13,500 expected, we lost 41,000 jobs. Odds climbed to 37%.

• Canada CPI – August 19:Headline inflation fell to 1.7% vs 1.8% expected. Odds rose to 40%.

• Canada GDP – August 29: Third straight monthly decline in GDP. Markets moved to 50% odds of a September cut. 

Markets odds change daily on every headline… US based or Canadian. So expect more swings. As of today (September 3), the market is pricing roughly a 54%chance of a cut on September 17… slightly better than a coin flip and a long way from 13% at the month’s start.

What’s still to come before Sept 17

There are three notable events scheduled: 

• Canada jobs: September 5

• U.S. CPI: September 11

• Canada CPI: September 16

Any surprise here could tilt the decision in either direction. Time will tell. 

Fixed Mortgage Rate Update

The Bank of Canada’s overnight rate is one thing, but fixed mortgage rates are an entirely different animal. Fixed rates are heavily driven by Government of Canada bond yields. The 5-year GoC yield is down 8.43% from its mid-July peak and is now at its lowest since July 1. It’s still a fair bit above early-April levels, when yields hit a 3-year low. While the drop in bond yields is promising news, we would need to see them continue to fall before we start to see any notable drops in fixed mortgage rates.  Most lenders are sitting in the low-to-mid 4% range.

There are also a few hot rate promos right now… as low as 3.69% (insured, 3-year fixed) or as low as 3.99% (uninsured). Great deals, but they don’t automatically signal a broad downtrend (at least not yet). Treat them as limited-time promotions that can be pulled without notice.

Final Thoughts

We’re effectively in coin-flip territory for September 17. Between now and then, three key reports will either lock in a cut or push the Bank to wait.

What to do now:

• If you’re shopping or renewing in the next 120 days: Lock in a competitive fixed rate and keep a variable rate option in your back pocket. That way you benefit if pricing improves but aren’t exposed if markets snap back. We’ll of course advise you on the best strategy. 

• If you’re mid-term variable: No need to try to guess the outcome of the next meeting. Stay the course unless cash-flow stress is real. We can then advise you on your best options, tailored to your specific situation. As I say in my book, everyone is a bit different and there is no one size fits all mortgage advice. 

As always, my team and I can map the best structure for your timeline and risk comfort… not just the best rate today, but the best outcome over your full term. If you want a quick second opinion or to grab a rate hold, reach out and we’ll get you set up!