Bank of Canada Stays Put — But A Softening Bias Grows as Mortgage Originations Spike

BoC Holds the Line, But Easing Signals Ahead

The Bank of Canada maintained its overnight rate at 2.75% for the third straight meeting, according to the minutes from its July 30 gathering. Policymakers remain divided—some argue strong core inflation and trade uncertainty call for patience, while others feel conditions may warrant further cuts if the economy weakens

While the central bank stayed cautious, the meeting signaled a softening bias, suggesting more room for rate cuts if economic slack persists. Markets are pricing in at least one rate cut before year-end.

Mortgage Activity Accelerates — Especially Among Subprime Borrowers

Meanwhile, Canada’s mortgage market is picking up steam. New data from TransUnion shows a 51% year-over-year surge in mortgage originations in Q1 2025—driven partly by subprime borrowers.

The timing is notable: while rising origination often correlates with optimism and demand, it comes amid a backdrop of renewal pain. The Bank of Canada reports that roughly 60% of mortgagors renewing in 2025 and 2026 will face higher payments—especially those with five-year fixed-rate mortgages, who may see increases of 15–20% compared with December 2024.

What This Means for You

Canada’s mortgage scene is at a pivotal inflection point:

• Variable-rate borrowers are breathing easier. If the BoC proceeds with cuts, prime-linked mortgages may benefit relatively soon.
• Fixed-rate borrowers, particularly those renewing soon, could face a jolt. A mortgage renewal with a 15–20% payment spike isn’t just an adjustment—it can affect household budgets.
• The rise in subprime originations suggests both pent-up demand and potentially higher risk lending—a trend to monitor if you’re shopping for a mortgage or considering refinancing.

Market Insights & Timing

• The BoC’s cautious hold, paired with easing signals, makes waiting out the market for the next cut a viable strategy—especially for borrowers with variable-rate products.
• But for those locked into fixed deals, swap or refinance options may be worth evaluating before jumps in rate-based contractual payments hit your monthly outgo.
• With mortgage originations climbing, lenders are loosening credit—but that may come with more stringent terms or interest premiums for higher-risk borrowers.

Canada’s borrowing environment is balancing on a delicate tightrope: cautious optimism from central bankers, increasing appetite from borrowers, and the real risk of sticker shock at renewal. Whether you’re entering, renewing, or adjusting your mortgage now matters more than ever.

Stay informed with Mortgage.Expert — we’ll help you navigate this shifting interest rate landscape.

Contact Us for Mortgage Advice »