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October Rate Cut: How Will It Impact Your Mortgage and the Economy?

As we approach the Bank of Canada's next meeting on October 23rd, there’s a lot of discussion about whether they’ll lower interest rates by 0.25% or make a bigger cut of 0.50%. With recent economic data in play, let’s break down the key factors that could influence their decision and what it means for you as a homeowner or future buyer.





1. Will the Bank of Canada cut by 0.25% or 0.50%?

Former Bank of Canada Deputy Governor Paul Beaudry believes a larger 0.50% rate cut would be best, as it could boost confidence in the economy. He argues that getting rates back to a "neutral" level quickly could help both households and businesses. However, there’s a debate on whether a smaller 0.25% cut is more realistic, especially given the uncertainty in the economy. Some economists suggest that while the job market is holding steady, broader economic headwinds could still justify a larger cut.


2. The Labour Market and Mortgage Rates

The Canadian economy added 47,000 jobs in September, which brought the unemployment rate down slightly to 6.5%. Most of this job growth came from 112,000 full-time positions, though it was offset by a loss of 61,000 part-time jobs. Strong employment numbers usually suggest less need for aggressive rate cuts. But despite this, some economists still believe the Bank of Canada will go for a larger cut, particularly to counteract other economic challenges and declining wage growth.

Labour market performance plays a big role in mortgage rate decisions, as wage growth and employment trends affect household income and spending. When jobs are stable, people feel more confident about borrowing, but a slowdown in job growth might push the Bank to lower rates faster.


3. Inflation and What It Means for Homeowners

Inflation remains a critical factor. The Bank of Canada aims to bring inflation back to its 2% target, and while we’ve seen some progress, there’s still work to do. Wage growth is slowing down, and the labour force participation rate dropped in September, meaning fewer people are looking for work despite job gains. These signals point to lingering challenges in the economy that the Bank may address with rate cuts.

It’s important to note that the prime rates impacted by these cuts apply to variable-rate mortgages. If you’re in a fixed-rate mortgage, these changes won’t affect your payments. However, it’s a good idea to stay tuned for updates after the October 23rd meeting, especially as the Bank of Canada’s final meeting of the year is set for December 11th, 2024.


What’s Next? The October 23rd meeting will be pivotal. Will the Bank of Canada opt for a cautious 0.25% cut or make a bolder 0.50% move? Stay tuned to find out how this could impact mortgage rates and the broader economy. Keep an eye on the labour market and inflation goals, as these are the key drivers behind rate decisions.

For those with variable-rate mortgages, these rate cuts will likely affect your payments, so it’s important to keep informed. Fixed-rate holders, however, can rest easy knowing that their rates won’t change based on these prime rate adjustments.


Stay tuned for the Bank of Canada’s announcement on October 23rd, and don’t forget the final meeting of the year on December 11th, 2024.

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Emily Miszk Mortgage Broker
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