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We may have seen the last rate cuts on both sides of the 49th parallel in 2025.
When the Bank of Canada (BoC) cut its policy rate on October 29, it assessed that its policy rate is now “at about the right level” if our economy evolves as expected. At the accompanying press conference, BoC Governor Macklem added that it would take an “accumulation” of evidence for the Bank to change its mind.
Bond market investors have now reduced the odds of a BoC rate cut at its next meeting on December 10 to less than 10%.
The US Federal Reserve also cut its policy rate on October 29. Bond-market investors expected more to follow, but at the Fed’s accompanying press conference, Fed Chair Jerome Powell cautioned that “a further reduction in the policy rate at the December meeting is not a foregone conclusion” and emphasized that “policy is not on a preset course”.
In addition to balancing concerns about rising inflationary pressures with softening labour-market conditions, the Fed has been forced to chart its course without the benefit of official economic data.
The US federal government shutdown prevented the release of more than a month’s worth of key data, and that has increased the Fed’s caution. Fed Chair Powell likened that challenge to trying to drive in the fog, and he noted that in such circumstances, the best option is to slow down.
The shutdown finally ended last Wednesday, but it is not clear how much of the missing data will eventually be released, so the information fog isn’t going to dissipate overnight.
In a speech last week, another voting member of the Fed’s rate committee supported Powell’s wait-and-see approach. Boston Fed President Susan Collins, who is known for being cautious with her policy-rate commentary, didn’t hedge this time.
She said she believes that it “will likely be appropriate to keep policy rates at the current level for some time to balance the inflation and employment risks in this highly uncertain environment”. For that reason, she sees “several reasons to have a relatively high bar for additional easing in the near term.”
A month ago, US bond-market investors put the odds of a US Federal Reserve rate cut at its next policy-rate meeting on December 10 at 95%. Last week those odds were reduced to less than 50%.
The Latest on Mortgage Rates
Government of Canada bond yields moved a little higher last week as bond-market investors reduced the odds of more rate cuts in 2025.
Statistics Canada will release our latest Consumer Price Index (for October) this morning. That report will likely determine where our bond yields, and the fixed mortgage rates that are priced on them, head next.
Variable-rate mortgage discounts were unchanged last week.
Variable-rate borrowers aren’t likely to see another BoC rate cut in 2025, but I continue to expect that the Bank will reduce its policy rate by at least another 0.25% before this rate-cut cycle is completed.
Insider’s Tip for Borrowers
Borrowers often ask me about the impact that a credit check will have on their scores. This post demystifies how credit scores are calculated and highlights the factors that matter most.
(Spoiler alert: while a periodic credit check does technically drop your score, the impact is both minor and temporary.)
My Take on Today’s Most Popular Mortgage Options
My assessment of today’s mortgage options remains the same.
Fixed rates are offered at about their long-term average levels.
Right now, the best available three- and five-year fixed rates are both good options. If these rates remain roughly equal, I think five-year fixed-rate terms offer slightly better value.
I continue to believe that today’s variable mortgage rates will likely produce the lowest borrowing cost over their full terms (even though additional BoC rate cuts will likely be delayed).
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.
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.
