How Our Surprise Jobs Report is Impacting Mortgage Rates
December 8, 2025
Last week the Bank of Canada (BoC) left its policy rate unchanged, as expected.
In its formal policy statement, the Bank observed that our GDP was “surprisingly strong” in Q3, but it attributed that strength largely to technical factors (which I wrote about here).
It forecasted “weak” GDP growth in Q4 followed by a pickup in 2026, while noting that “uncertainty remains high and large swings in trade may continue to cause quarterly volatility”.
The BoC assessed that our labour market was showing “signs of improvement” but cautioned that “job markets in trade-sensitive sectors remain weak and economy-wide hiring intentions continue to be subdued”.
The Bank expects our Consumer Price Index (CPI) to remain close to its 2% target and “economic slack to roughly offset cost pressures associated with the reconfiguration of trade”.
It maintained its view that its current policy rate of 2.25% is at “about the right level” if and as “inflation and economic activity evolve broadly in line with the October projection”.
The most noteworthy part of last week’s BoC announcement was its accompanying press conference.
In the lead up to last week’s meeting, bond-market investors had begun to price in the possibility of BoC rate hikes in the latter half of 2026. That fueled increases in both Government of Canada (GoC) bond yields and the fixed mortgage rates that are priced on them.
Simply put, rate-hike speculation has counteracted the stimulative impact that the BoC’s recent policy-rate cuts were intended to provide.
In last week’s post I predicted that the Bank would push back against that narrative. Governor Macklem’s press-conference commentary did just that.
He emphasized that the Bank’s primary focus was supporting our economy through this period of trade-related uncertainty. He downplayed above-target inflation indicators, assessing them to be temporary in nature. He reinforced the Bank’s assessment that our GDP data over-stated our economy’s strength. He also noted that tariff-related price increases were not fixable with rate hikes.
Most importantly, Governor Macklem emphasized that while the Bank thinks its policy rate is currently at about the right level, “uncertainty remains high and the range of possible outcomes is wider than usual”. He provided further reassurance that “if the outlook changes, we are prepared to respond”.
The BoC’s messaging made it clear that: 1) It isn’t considering rate hikes at this time, 2) It will maintain its wait-and-see approach over the near term, and 3) It is open to cutting again if needed.
The Latest on Mortgage Rates
GoC bond yields cooled a little last week as bond-market investors recalibrated their bets on rate hikes in the latter part of next year.
That downdraft wasn’t enough to stop lenders from continuing to raise their fixed rates in response to the previous sharp run-up in bond yields over the two weeks prior. For now, some upward pressure on our fixed mortgage rates remains in place.
The US Federal Reserve cut its policy rate again last week. Overall, it was non-committal on the likelihood of more near-term cuts. It remains stuck between a rock and a hard place, trying to bolster weakening US labour market conditions without exacerbating the bond market’s growing concerns about the persistence ofabove-target US inflation. For now, US Treasury yields remain range bound.
Five-year variable-rate discounts have widened a little of late.
The BoC isn’t planning to move its policy rate again until it has seen an accumulation of evidence to confirm how our economy is responding to trade uncertainty. But it leaned more dovish than expected last week, which bolsters my belief that the Bank’s next (eventual) move will be a cut.
Insider’s Tip for Borrowers
This post offers a simple mortgage tip that will help you lower your interest cost, pay off your mortgage more quickly, and prepare for higher rates at renewal:
The Magic of Five Percent: A New Year’s Resolution Worth Keeping.
My Take on Today’s Most Popular Mortgage Options
Fixed rates remain at about their long-term average levels.
Right now, the best available three- and five-year fixed rates are both popular choices.
If these rates remain roughly equal, I think five-year fixed-rate terms offer slightly better value. But lenders have started to widen the spread between their three- and five-year fixed rates of late, so the opportunity to lock in additional years of fixed-rate certainty for little to no additional premium isn’t likely to last much longer.
I expect today’s variable mortgage rates to produce the lowest borrowing cost over their full terms (even though additional BoC rate cuts don’t appear likely over the near term).
Anyone choosing a variable rate should do so only if they can live with its inherent potential for volatility. Borrowers must also have the financial capacity to withstand higher costs (and in some cases, higher payments) should my assessment prove incorrect.
This post provides a detailed summary of the key terms and conditions to pay attention to in your mortgage contract. (They are not standard and can vary in important ways.)
Three Posts Every New Visitor to My Blog Should Read
This post provides a detailed comparison of the pros and cons of fixed- and variable-rate mortgages.
This post provides a detailed breakdown of the very different ways that lenders calculate their fixed-rate mortgage penalties. The amounts charged can vary significantly from lender to lender. A lower penalty can save borrowers thousands of dollars if rates drop.
This post provides a detailed summary of the key terms and conditions to pay attention to in your mortgage contract.
