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Understanding Inflation and Its Impact on Mortgage Rates
- Paul Meredith
- Oct 22
- 3 min read
Updated: 3 days ago
The Current Economic Climate
Yes, inflation is rising, but it’s not running away. Even after the release of Statistics Canada’s report on Tuesday, markets still put the odds of a rate cut on October 29 at 82%. It’s a relatively safe bet to say a cut is coming next week, just not a guarantee.
Here’s the quick read from leading economists after the data:
“One hotter-than-expected month does not a new trend make, but it is worth monitoring whether the strength in price pressures is indicative of ongoing consumer resilience. The Bank of Canada should still have room to deliver another cut.”
“September’s stronger-than-expected CPI inflation print raises the odds that the Bank of Canada will pause on October 29, but underlying inflation remains contained. With the economy struggling to grow and slack in the labour market, we expect another 25bp rate cut next week.”
“After a review of the data, a few volatile categories drove the headline surprise. Given the BoC’s focus on underlying inflation, he said central bankers will choose to cut rates again next week, citing continued economic weakness.”
“We have been on the dovish side of the ledger, calling for the Bank to eventually cut the overnight rate to 2.0% (and possibly lower if trade gets uglier), but were not convinced that October would see another cut. Given today's setback for core, we'll stay there for now.”
“Headline CPI accelerated by more than anticipated in September, but core measures of inflation were just subdued enough to support a further 25bp cut from the Bank of Canada next week.”
“A higher unemployment rate, lower business inflation expectations in the BoC's own Business Outlook Survey, and the removal of most Canadian counter-tariffs should reinforce the BoC's view that upside inflation risks have eased. Our base-case assumes one more reduction in the overnight rate next week in October.”
“Canadian core inflation measures remain good enough for the BoC to cut next week when properly evaluated in terms of month-over-month trends and breadth. It should be a careful, hawkish sounding cut.”
How This Hits Fixed Mortgage Rates
Fixed mortgage rates are priced off Government of Canada bond yields. Big economic surprises can move yields quickly. This time? A shrug. Yields ticked up slightly on the release, indicating that markets aren’t overly concerned about this single inflation print.
If inflation were to keep climbing from here, both fixed rates and the BoC’s policy rate would eventually need to follow. However, we’re not there right now.
The Importance of Staying Informed
Understanding the implications of inflation on mortgage rates is crucial for homeowners and potential buyers. It’s essential to stay informed about economic indicators and how they can affect your financial decisions.
What You Can Do
Monitor Economic Reports: Keep an eye on inflation reports and the Bank of Canada’s announcements. These can provide insights into future rate changes.
Consult with Experts: Speak with mortgage advisors who can help you navigate the complexities of mortgage rates and provide tailored advice based on your situation.
Consider Locking in Rates: If you’re within 120 days of your closing date, or just want today’s best available terms held for you, we’ll lock your rate and keep shopping the market for you, right up to funding. This way, if rates drop, you win; if promotions vanish, you’re covered.
Final Thoughts
With market odds of a Bank of Canada rate cut on October 29th sitting at 82%, a pause from the BoC next week would be a big surprise. Fixed mortgage rates remain stable, which will likely remain the case through next week’s expected cut.
That said, even in stable or downward markets, fixed mortgage rates can always change. Promotions can end, or a lender may need to simply increase rates just to control their inflow of applications. The best way to ensure you’re securing the lowest rate possible is to get something locked in. We will always get it lowered for you where the opportunity exists.
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