Wrapping Up Summer 2025 – A Market Recap
As summer winds down and we move into fall, it’s a good time to look back at what’s been happening in the world of mortgages, housing, and interest rates. Here’s your end-of-summer market snapshot—and what it means for you.
Bank of Canada: Affordability Takes Centre Stage
Over the past month, the Bank of Canada started laying the groundwork for its 2026 monetary policy renewal. For the first time, housing affordability is officially part of the conversation.
While the Bank can’t build homes (that’s on governments and developers), Governor Tiff Macklem acknowledged what we all know: interest rates have a huge impact on housing demand. With affordability tied so closely to inflation, this issue can no longer be brushed aside.
What stays the same? The 2% inflation target remains firm. But the way “core inflation” is measured could be updated to better account for supply shocks, meaning policy decisions may look a little different moving forward.
Takeaway: Expect affordability to weigh more heavily in future rate decisions—something that could influence how quickly borrowing costs come down in the years ahead.
Housing Supply: The Numbers Don’t Add Up
Canada’s housing shortage dominated headlines again in August. The country needs about 3.2 million homes over the next decade to restore balance. Current projections? Roughly 2.5 million builds—leaving us short by 700,000.
Here’s how the math shakes out:
We’d need 290,000 completions annually to close the gap.
Our best year so far was 2024, with 276,000 homes.
At the same time, new household formation hit a record 482,000 in 2024.
Immigration targets may ease some pressure on demand, but supply remains the bottleneck. CMHC estimates suggest we’d need 430k–480k completions annually—well above what’s currently happening.
Takeaway for buyers & borrowers: The crunch isn’t easing anytime soon. Affordability pressures are sticking around, which means strategies like rate holds and creative mortgage solutions are more important than ever. (That’s where we come in—hint, hint.)
South of the Border: Watching the Fed
August also brought plenty of movement from the U.S. Federal Reserve. Markets are pricing in a possible September rate cut, though U.S. inflation is still sitting at 2.9%—above target.
Here’s what shifted:
Traders expect up to two cuts by year-end, but uncertainty is high.
Bond yields nudged up (10-year Treasury at 4.27%).
Stocks pulled back slightly after testing record highs.
Small businesses could see the biggest benefit if rates come down.
Why it matters here in Canada: U.S. monetary policy heavily influences our bond markets—and by extension, fixed mortgage rates. If the Fed starts cutting, we may see some relief on fixed rates later this year.
Bottom Line: Your End-of-Summer Takeaways
Bank of Canada: Inflation target steady at 2%, but affordability now part of the playbook.
Housing Supply: Canada faces a 700,000-home shortfall, keeping demand and prices under pressure.
Global Rates: If the Fed cuts, Canadian fixed mortgage rates may follow—but inflation risk remains.
As always, Mortgage Teacher is here to cut through the noise and keep things simple. Whether you’re buying, refinancing, or just staying informed, let’s chat about how to make today’s market work in your favour.