Canada’s September Rate Cut Odds Just Spiked - Here’s Why Your Mortgage Could Drop Soon
I’ve been saying it for months:
The Bank of Canada has been holding rates too high for too long. The economy’s slowing. Families are stretched. And now the data proves it.
July’s jobs numbers were a gut punch. And U.S. inflation news just made a September rate cut way more likely.
Canada’s Job Market Just Fell Off a Cliff
Jobs lost in July: 41,000 (worst showing since January 2022)
Unemployment: 6.9% (near a multi-year high)
Hours worked: Down - bad news for GDP
Where it hurt most: Full-time, private sector jobs in construction, information, culture, and recreation
Economists had expected job gains - instead, 10 of 16 sectors shed jobs, and four provinces saw losses, including big hits in B.C. and Alberta (Financial Post, Aug. 8, 2025).
BMO’s Doug Porter scored the report 22.5 out of 100 - the weakest reading in three years. His verdict? “Unambiguously weak.”
Markets Took Notice
Before the report, traders gave September’s rate cut about a 35% chance. After? That jumped to 38–40% (Globe and Mail / Morningstar).
Markets are now pricing better than 50% odds of a cut by October - and another one before year-end.
The U.S. Just Turned Up the Heat
On August 12, U.S. inflation came in at 2.7% for July, with core inflation at 3.1% (Canadian Mortgage Trends).
Even with inflation holding, the U.S. job market is cooling - and big banks like TD, CIBC, and BMO expect the Fed to cut rates multiple times before year-end.
If the Fed cuts and Canada doesn’t, the Canadian dollar could rise, hurting exports and growth. That’s why the Bank of Canada often moves in step with the U.S. - to keep the economy balanced.
Markets Already See More Cuts Coming
The Bank of Canada’s Market Participants Survey (MPAMAG, Aug. 12, 2025) says:
September: 2.50% policy rate
December: 2.25% policy rate
No more changes until 2027
The same survey shows:
35% chance of recession in the next 6 months
84.6% say the economy is running below potential
89% see trade tensions as the top risk
Economists Agree - The Pressure Is On
BMO (Doug Porter): Job market weakness will put “downward pressure on inflation,” supporting modest cuts.
Capital Economics (Alexandra Brown): This “opens the door” for September cuts - unless CPI surprises high.
CIBC (Andrew Grantham): Weak data “supports” a 25 bps September cut.
National Bank: Labour market is “soft” and staying on the sidelines is “uncomfortable” for the BoC.
Bond Yields Are Already Moving
The same day U.S. inflation data dropped, Canada’s 5-year bond yield (a key driver of fixed mortgage rates) fell to 2.92% before closing at 2.95%.
That means fixed mortgage rates could start easing before the BoC makes its next move.
Why Homeowners Should Care
If the BoC cuts in September:
Variable rates: Payments could drop almost instantly.
Fixed rates: Could slide ahead of the announcement.
Housing market: Cheaper borrowing could spark more buyer activity.
The Wild Card: Inflation
Jobs data is weak. Markets are leaning toward cuts. But the Bank of Canada still has two CPI reports to review before September 17.
If inflation softens, a September cut is likely. If not, it may wait until October - but markets still expect two cuts by year-end.
Don’t Wait Until the Announcement
When the cut comes, the market will move fast. Lenders will adjust rates. Competition for homes could spike
If you’re renewing, refinancing, or buying, now is the time to position yourself.
I can run the numbers, compare lenders, and lock in the right strategy before the rest of the market catches up.
📅 Book your free mortgage review today → Schedule a Call
Jeff Dinsmore
Mortgage Broker
FSRA # 10315
TMG - The mortgage group
VeloMortgage.ca
Sources:
Financial Post, ‘Worst jobs reading in three years’ raises odds of Bank of Canada rate cut next month, Aug. 8, 2025
Morningstar, Shock July jobs data boosts odds of Bank of Canada rate cut in September, Aug. 8, 2025
Globe and Mail, How Friday’s surprisingly weak jobs report has shifted market and economist views for future BoC rate cuts, Aug. 8, 2025
Canadian Mortgage Trends, U.S. inflation rises to 2.7% in July, Canadian bond yields react, Aug. 12, 2025
MPAMAG, Bank of Canada expected to cut rates twice more in 2025, survey shows, Aug. 12, 2025