TSX Futures Edge Higher as BoC and Fed Signal More Rate Cuts Ahead

Canada’s stock market rallied to another record high on Thursday as expectations for continued interest rate relief from both the Bank of Canada and the U.S. Federal Reserve lifted investor sentiment. The S&P/TSX Composite Index closed at 29,453.53, up 0.5%, eclipsing its earlier September peak.

Why Markets Moved

Both the Bank of Canada (BoC) and the U.S. Federal Reserve cut their key interest rates by 25 basis points this week — the BoC to 2.50%, the Fed to 4.75%. It was the first time in months that both central banks acted in tandem, reflecting concerns over slowing growth and easing inflation.

For Canadian mortgage borrowers, the immediate impact lies in the continued downward pull on variable mortgage rates. With prime already reduced to 4.70% by the big banks, Thursday’s signal of potential further cuts adds momentum for homeowners and buyers hoping for cheaper financing in the coming months.

Investor Caution vs. Mortgage Relief

Market watchers, however, noted a contradiction:

• Equity valuations on the TSX are at their highest forward P/E ratio (16.45) since 2021, suggesting stocks may be overpriced.
• Yet lower rates could keep credit cheaper and boost activity in the housing and mortgage markets.

For households, this means a friendlier borrowing climate, even as investors tread carefully.

Sector Spotlight

• Technology stocks gained 1.7%, with Shopify leading the charge, up 3%.
• Financials, which make up a third of the TSX, rose 0.5% — benefiting directly from lower rate expectations that can spur lending and refinancing activity.
• Energy stocks slipped 0.2% as oil prices eased to $63.57/barrel.

What This Means for Borrowers

• Variable-rate mortgages: The rate cut momentum could trim payments by $60–$90/month on a $500,000 loan, with further cuts offering more relief.
• Fixed-rate mortgages: Bond yields are already easing, hinting at cheaper five-year fixed products (≈3.9–4.1%).
• Housing market outlook: More affordable financing may help offset affordability pressures, though builders remain cautious after August’s 16% housing starts decline.

The BoC’s latest move, coupled with signals of possible further cuts, is reshaping Canada’s mortgage landscape. For homeowners, the mix of lower prime rates and falling fixed-rate offers could open doors to refinancing or new home purchases — even as equity markets flash signs of froth.