Bank of Canada Lowers Policy Rate to 2.25%

Today, the Bank of Canada lowered the overnight policy rate by 25 bps to 2.25% as was widely expected. This is the bottom of the Bank’s estimate of the neutral overnight rate, where monetary policy is neither expansionary nor contractionary. The economy will grow at about a 0.5% pace in Q3, causing the Bank to cut rates again at the final meeting this year on December 10. The easing will then end, but rates will remain relatively subdued until more trade uncertainty is alleviated.

The Fed is widely expected to cut rates by 25 bps this afternoon as well.

Today’s Monetary Policy Report suggests that the significant decline in export growth will persist for some time. Layoffs in trade-dependent sectors have already slowed considerably, especially in Ontario, Quebec, and some softwood lumber businesses in several provinces. The central bank acknowledged that “because US trade policy remains unpredictable and uncertainty is still higher than usual, this projection is subject to a wider-than-normal range of risks.”

“In the United States, economic activity has been strong, supported by the boom in AI investment. At the same time, employment growth has slowed and tariffs have started to push up consumer prices. Growth in the euro area is decelerating due to weaker exports and slowing domestic demand. In China, lower exports to the United States have been offset by higher exports to other countries, but business investment has weakened.  Global financial conditions have eased further since July and oil prices have been fairly stable. The Canadian dollar has depreciated slightly against the US dollar.”

“Canada’s economy contracted by 1.6% in the second quarter, reflecting a drop in exports and weak business investment amid heightened uncertainty. Meanwhile, household spending grew at a healthy pace. US trade actions and related uncertainty are having severe effects on targeted sectors, including autos, steel, aluminum, and lumber. As a result, GDP growth is expected to be weak in the second half of the year. Growth will get some support from rising consumer and government spending and residential investment, and then pick up gradually as exports and business investment begin to recover.”

Canada’s labour market remains soft, and job vacancies have declined sharply despite the September improvement in job growth. Job losses continue to mount in trade-impacted sectors, and hiring has been weak across the economy. The unemployment rate remained at 7.1%, well above the US rate of 4.3%. Slower population growth translates into fewer new jobs and less inflation pressure. On a per capita basis, the economy is already in a recession.

The Bank projects GDP will grow by 1.2% in 2025, 1.1% in 2026 and 1.6% in 2027. Quarterly, growth strengthens in 2026 after a weak second half of this year. Excess capacity in the economy is expected to persist and be gradually absorbed.

“CPI inflation was 2.4% in September, slightly higher than the Bank had anticipated. Inflation excluding taxes was 2.9%. The Bank’s preferred measures of core inflation have been sticky around 3%. Expanding the range of indicators to include alternative measures of core inflation and the distribution of price changes among CPI components suggests underlying inflation remains around 2.5%. The Bank expects inflationary pressures to ease in the months ahead and CPI inflation to remain near 2% over the projection horizon”.

“If inflation and economic activity evolve broadly in line with the October projection, the Governing Council sees the current policy rate at about the right level to keep inflation close to 2% while helping the economy through this period of structural adjustment. If the outlook changes, we are prepared to respond. Governing Council will be assessing incoming data carefully relative to the Bank’s forecast.”

Bottom Line

The Bank of Canada has shown its willingness to bolster the Canadian economy amid unprecedented trade uncertainty. While Canada is working hard to establish alternate trade partners, even China cannot replace the US in terms of proximity and cost-effectiveness, given the huge transport costs. China has stepped up its oil purchases to record levels, but larger oil flows east will require additional pipelines to BC. There is no market the size of the US market to replace exports of steel and aluminum. The US will also suffer from the economic impact of stepping away from the Canada-US-Mexico free trade deal. A renegotiation of the contract is likely to come before the end of next year. As of now, the US is signalling their desire to exit the agreement. We can only hope that cooler heads will prevail.

The auto industry is a case in point. Onshoring non-US auto production would require a 75% increase in US production and the construction of $50 billion in new factories. This would take years and significantly reduce the profitability of US auto companies.

Canada is the US’s number one supplier of steel and aluminum, with its competitively low hydroelectric costs. It will take time for the US to create the capacity to replace aluminum imports from Quebec.

Canada is the number one trading partner for 32 American states, many of which are lobbying Washington to end this CUSMA bashing.

It will take time for Canada to adjust to this new reality, which leads us to conclude that another cut in overnight rates is probable at the next decision date on December 10.

Article courtesy of Dr. Sherry Cooper – Chief Economist, Dominion Lending Centres

Angela Calla is a mortgage renewal and debt elimination expert with over 20 years of industry experience. She is also a multi-award-winning mortgage professional. Since beginning as a mortgage broker in 2004, Angela has helped thousands of Canadians optimize their mortgage strategies, eliminate debt, and build wealth through real estate.

She is the best-selling author of The Mortgage Code, which equips readers with the tools to make informed financial decisions. Additionally, she is the host of Canada’s longest-running finance radio show on CKNW, where she simplifies mortgage advice and empowers listeners to take control of their financial futures.

Angela has been recognized as Business Leader of the Year (2020) by the Tri-Cities Chamber of Commerce and Entrepreneur of the Year (2019) by the City of Port Coquitlam. She is also a sought-after speaker and educator, delivering accredited training for real estate boards across Greater Vancouver.

Angela is a frequent go-to source for media and publishers across the country. For media interviews, speaking inquiries, or personal mortgage assistance, please contact Angela at hello@countoncalla.ca or at 604-802-3983.

Click here to view the latest news on our blog. 

Here’s a true story that shows why it matters who you trust with your mortgage.

A young couple recently had their mortgage declined by their bank — even though they were fully qualified. Why? The branch adviser misread their income, and once the file was declined, there was no second chance. They lost out on a great rate and valuable time.

The truth is, bank advisers are generalists, while mortgage brokers specialize in navigating lender policies, income complexities, and the best ways to get your file approved. Full story here: https://www.canadianmortgagetrends.com/2025/10/opinion-think-twice-before-handing-your-mortgage-to-a-bank-adviser/

At the Angela Calla Mortgage Team, our advice is free, completely unbiased, and focused only on what’s best for you — not any one bank. 

We work with multiple lenders to find the right fit, protect your credit, and help you make confident, informed choices for your financial future.

 I share more stories like this — and how to avoid these costly mistakes — in my book “The Mortgage Code.” https://www.amazon.ca/Mortgage-Code-Helping-Property-Mistakes-ebook/dp/B07HFHR8TV?dplnkId=a8cf0153-1b54-4044-962a-5df1166a181d&nodl=1

 If you or someone you care about is buying, renewing, or looking to consolidate debt, reach out to my team today. Let’s make sure your mortgage is in the right hands!

Angela Calla is a mortgage renewal and debt elimination expert with over 20 years of industry experience. She is also a multi-award-winning mortgage professional. Since beginning as a mortgage broker in 2004, Angela has helped thousands of Canadians optimize their mortgage strategies, eliminate debt, and build wealth through real estate.

She is the best-selling author of The Mortgage Code, which equips readers with the tools to make informed financial decisions. Additionally, she is the host of Canada’s longest-running finance radio show on CKNW, where she simplifies mortgage advice and empowers listeners to take control of their financial futures.

Angela has been recognized as Business Leader of the Year (2020) by the Tri-Cities Chamber of Commerce and Entrepreneur of the Year (2019) by the City of Port Coquitlam. She is also a sought-after speaker and educator, delivering accredited training for real estate boards across Greater Vancouver.

Angela is a frequent go-to source for media and publishers across the country. For media interviews, speaking inquiries, or personal mortgage assistance, please contact Angela at hello@countoncalla.ca or at 604-802-3983.

Click here to view the latest news on our blog. 

Welcome to the October issue of my monthly newsletter!

PSL (or pumpkin spice latte for the unfamiliar) season is in full swing and love it or hate it, a 20-million-latte-strong annual sales figure (for Starbucks alone!) is a cultural phenomenon. It’s undeniably the flavour of fall in North America, supporting a billion-dollar plus industry and blanketing a massive cross-section of products. Heck, if there was a PSL mortgage, I’d be selling it. Whether you’re picking up that pumpkin party-in-your-mouth beverage to get you through a house hunting expedition, to power you up to replace an appliance at home, or just to enjoy while reading this newsletter – you’re not alone. My question to you is – are you a PSL purist, a seasonal treat sampler, or immune to the pull of the pumpkin altogether?!

Don’t Get Spooked! First-Time Homebuyer Tips for a Smooth Process

Buying your first home – no matter what your age – is a significant life event. It can bring up all kinds of stresses, both financially and emotionally. Being prepared for what’s to come can put your mind at ease. So, as an expert in the process, here are my best tips to minimize stress, and avoid hiccups and surprises throughout the process.

1. Set Limits: Allot a maximum amount of time for house shopping and scrolling on socials, websites, etc. per day. Don’t get overwhelmed by browsing homes for hours on end, listening to everything you hear on social media, etc.
2. Build Your Team: You’ll need a real estate agent you’re comfortable working with, a lawyer to review documents, a thorough home inspector, and a mortgage broker to get your financing in order. It’s okay to meet a few of each profession and make sure you get the right team lined up. Asking for a referral is a great way to find that perfect someone.
3. Get Pre-Qualified & Pre-Approved: Using a mortgage calculator (or downloading my app) will help you determine what mortgage payments and subsequent home shopping budget you’d qualify for. A pre-approval looks more carefully at your credit score and income, giving you an estimate what a bank would lend YOU. A mortgage broker is the perfect person to help you get it.
4. Create a Budget – And Stick to It: Once you know what your downpayment and ongoing mortgage payments will be, you’ve got to also consider the other costs of buying a home (like an inspection, moving, closing fees, legal fees, etc.). Know how much cash upfront you’ll need and don’t overspend leading up to a home purchase.
5. Spend Time in Prospective Neighbourhoods: It’ll minimize surprises about the neighbours and habits of the residents, plus you’ll get familiar with routines like school buses, playground zones, garbage days and more.
6. Lower Your Expectations: Thinking you’ll a home that’s 100% perfect, at the price you want, with no one else bidding on it… well that’s not very realistic. So set out the absolute must-haves, consider what you can compromise on, and don’t get too wrapped up in just one house. Take your time and wait for one that fits your budget and your (lowered) expectations.
7. Monotask: If you’re trying to choose between houses, calculate expenses, hire a mover, rent a carpet cleaner, and declutter your home all at once, you’ll become scattered and ineffective. Instead of multitasking and trying to get everything done at once, pick just one task at a time and work on that exclusively.
8. Try a Daily Affirmation: Choose something “I am making good financial decisions every day to support buying a home” or “I remain optimistic about finding my future home” or “I trust that my realtor is working in my best interest” and repeat it when you feel stress over the purchase, process, or whatever else is bothering you.
9. Enlist a Support System: If you’re feeling overwhelmed, lean on someone for support. That might be your broker if you’re confused about a process or requirement or a friend who recently bought a house to confirm their experience. It might even be your family or friends to vent or a gym buddy to get a stress-relieving workout in. Don’t ignore the stress as it can build throughout the process.

Hardest hit by unaffordability and condo overbuilding, the extended GTA—The Golden Horseshoe — suffered the most in the downturn and is expected to suffer the most from the US tariffs. The auto and steel sectors have already endured substantial layoffs, and household surveys suggest that the fear of being laid off in the next year has risen meaningfully.

Parts of BC have also seen a decline in activity, with prices falling, but not to the same extent as in Ontario. Balanced, if sometimes tight, conditions are driving property values higher in most of the Prairies, Quebec and parts of Atlantic Canada. In contrast, high inventory is depressing values in Ontario and British Columbia. Toronto experienced what we believe will be a temporary pause in August, following its gradual upturn.

These developments are in line with our view that rebuilding market confidence will support a slow recovery in the second half of 2025 and set the stage for stronger demand in 2026. There is pent-up demand for housing, and sellers are motivated. Many have been on the market for months, and reality has seeped in. Prices have fallen.

Local data shows that the MLS Home Price Index has fallen again in Toronto, Hamilton, Calgary, Edmonton, the Fraser Valley, and Vancouver—all of which are being weighed down by abundant inventory.

Strong construction has contributed most to the inventory build-up in Calgary and Edmonton.

The Toronto area took a breather in August after four months of solid advances. Home resales dipped slightly by 1.8% from July, seasonally adjusted, with continued softness in condos weighing on activity. Resales were up 2.3% year-over-year.

Falling interest rates, recent price drops, higher inventory and easing trade war concerns will gradually drive up activity.

The mild and broad price correction continued last month. The area’s composite MLS HPI edged 0.1% lower from July seasonally adjusted to $978,100—extending a year-long downtrend.

The condo price index fell the most, -7% from a year ago, but all categories saw a correction, including single-detached family homes (-5.6%).

We expect property values to continue falling while the market regains a firmer footing. But, affordability—while improving—will remain a big issue.

The economic backdrop shows signs of stress as labour markets have weakened and excess capacity is rising. The two most recent labour reports showed employment losses in both July and August, totaling more than 100,000 positions, while the jobless rate hit 7.1% last month, up by half a percentage point since January. The economy contracted by 1.6% in the second quarter—the most significant decline since the pandemic — reflecting a considerable drop in exports. Business investment is also weak, as is residential construction.

Recent economic weakness will likely outweigh the bank’s concerns about firm core inflation over the past few months. A broad range of underlying price pressures showed some cooling.

The average of the Bank of Canada’s two preferred core measures decelerated to 3.05%, from 3.1% in July. The three-month moving average of these core rates held steady at 2.52%.

Shelter inflation slowed to 2.6%, while CPI excluding food and energy decelerated to 2.4%. CPI excluding eight volatile components and indirect taxes held steady at 2.6%. Still, the share of components within the consumer price index basket that are rising by 3% or more — another key metric closely watched by policymakers — rose to 39.1%, from 37.3% in July.

The Bank of Canada cut the policy rate by 25 bps on September 17, taking the overnight rate to 2.5%–half the level posted at the high of 5%. The central bank is likely to cut rates one or two more times this year. The Governing Council meets again on October 29 and December 10.

And that’s a wrap for October! I hope you all have a candy-filled spooky season and manage to sort out your costumes before the 31^st. Happy Halloween and see you back here in November.