People hunting for homes and mortgages have had a lot of economic and market news coming their way lately. Probably the most significant is the Bank of Canada’s decision to lower its policy rate.

As expected, the central bank trimmed a quarter of a point off its trendsetting interest rate, bring it to 2.50%. It is the first rate move since March.

The cut came a day after Statistics Canada reported the inflation rate rose to 1.9% in August, up from 1.7% in July.

Normally rising inflation would be a reason for the Bank not to lower its rate, due to concerns about over stimulating the economy and encouraging even more inflation. However, the Bank noted that other factors – such as stable (although higher than desired) core inflation, a decline in the gross domestic product and an increase in unemployment – indicate inflation is not a high risk.

The interest rate cut could make variable-rate mortgages look more attractive for those who are comfortable with potential rate movement.

The Canadian Real Estate Association reports August home sales increased 1.1% compared to July and were almost 2.0% better than a year earlier. The MLS Home Price Index showed flat pricing month-over-month, but registered a 3.4% decline year-over-year. CREA’s national average price was $664,000 in August 2025, up 1.8% from August 2024.

August new listings were up 2.6% over July and up 8.8% over a year earlier.

Published by First National Financial LP

Canada’s latest employment report has significantly increased the likelihood of an interest rate cut by the Bank of Canada on September 17.

Statistics Canada’s Labour Force Survey (LFS) for August shows a loss of nearly 66,000 jobs for the month. That follows a drop of 41,000 positions in July. The August unemployment rate stands at 7.1%, up from 6.9% a month earlier.

Looking back to June, the Survey of Employment, Hours and Payroll (SEPH) – which is considered more reliable than the Labour Force Survey (LFS) – shows more than 32,000 jobs were lost; a significant reversal from initial reports of 83,000 jobs added for the month.

Most of the August loses came in part-time positions but had an inordinate impact on workers aged 25 to 54, which is an important demographic in the first-time homebuyer market. On-going trade trouble with the United States is getting the blame.

Employment plays an important role in the Bank of Canada’s interest rate decisions. Market watchers now say there is a better than 80% chance the Bank will cut its policy rate later this month. However, inflation is still the key factor.

“All told, this weak report fully reinforces any bias for the BoC to ease somewhat further here, but inflation hasn’t quite given them the all-clear,” wrote bank economist Douglas Porter in a newsletter.

The next inflation report is due September 16, one day before the Bank of Canada’s next interest rate setting.

Published by First National Financial LP