Canada’s Inflation Cools to 2.2% in October, Offering Relief to Mortgage Borrowers

Ottawa | November 18, 2025 — 10:15 EST

Canada’s inflation rate slowed more than expected in October, easing to 2.2% year-over-year, driven largely by lower gasoline and food prices. In a particularly significant shift for homeowners, mortgage interest costs fell to 2.9%, dropping below the 3% mark for the first time since mid-2021. The latest inflation update from Statistics Canada suggests that household financial pressures may finally be stabilizing, even if cautiously.

For the mortgage market, the decline in the mortgage-interest-cost component is notable because it signals that the most aggressive phase of rate-shock impact may be easing. After more than two years of steadily rising or elevated borrowing costs, Canadians renewing or refinancing are beginning to see early signs of rate normalization—although actual rate relief remains dependent on lender pricing and market yields.

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A Softer Inflation Print Strengthens the Bank of Canada’s Hold Position

The Bank of Canada (BoC) held its policy rate at 2.25% in its last meeting, signaling comfort with current monetary settings. October’s inflation numbers add a layer of validation to that stance. With headline inflation now hovering close to the bank’s 2% target and mortgage-interest costs moderating, policymakers may feel less pressure to consider rate hikes in upcoming meetings.

For borrowers, rate stability reduces the probability of surprise payment shocks during renewals.
For lenders, a stable but lower inflation environment can compress spreads between funding costs and mortgage yields, creating competitive pressure—especially in fixed-rate terms.

However, analysts caution that core inflation measures remain sticky, particularly in services. While goods inflation has trended lower, wages and shelter costs continue to rise at faster-than-normal rates. This creates a complex backdrop: inflation is cooling, but not uniformly.

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What Falling Mortgage-Interest Costs Actually Mean for Borrowers

While the headline figure is encouraging, it requires context.
The mortgage-interest-cost index tracks what Canadians are paying on their mortgages—not the offered rate on new lending products.

Homeowners may experience the benefits through:

• Smoother renewal transitions: Rate increases at renewal are still present but may be less steep than those seen from 2023–2024.
• Lower fixed-rate quotes: With bond yields falling, 3-year and 5-year fixed mortgage rates are showing early signs of easing.
• Improved affordability in select markets: Lower borrowing costs can broaden eligibility for buyers who were previously marginally outside qualification limits.

However, this does not guarantee uniformly cheaper mortgages across lenders. Actual mortgage pricing depends on:

• Lender funding costs
• Competitive pressure within the segment
• Borrower credit profile
• Property type and loan-to-value ratio
• Term selection (variable vs. fixed)

Borrowers with higher-risk profiles will still see elevated spreads, and those who took on variable-rate or HELOC products during the tightening cycle remain exposed to volatility if market conditions shift.

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What Could Complicate the Path Ahead

Even with relief in the latest inflation print, several macro risks remain:

1. Wage growth remains strong

Persistent wage pressure can keep service-sector inflation above target, complicating the BoC’s long-term path.

2. Housing supply shortages continue

Lower rates could reignite demand, putting upward pressure on already constrained housing markets—especially in Vancouver, Toronto, and Halifax.

3. U.S. economic risk spillover

With 75% of Canadian exports tied to U.S. demand, any slowdown south of the border could weigh on employment and consumer confidence in Canada.

4. Renewal wave still approaching

The largest renewal cycle of the decade hits in 2026–2027. Even if rates fall modestly, many homeowners will still face higher monthly payments relative to their ultra-low pandemic rates.

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Canada’s October inflation report is genuinely encouraging for homeowners and buyers. Mortgage-interest costs dipping below 3% represents a measurable turning point—an early sign that peak payment stress may have passed. But the path ahead is not guaranteed to be smooth.

Borrowers should stay proactive: compare quotes, evaluate shorter vs. longer fixed terms, and stress-test budgets for different rate scenarios.