Mortgage Market Update - March 17, 2025

Just a few days since the next Bank of Canada rate announcement, both markets and mortgage watchers are leaning into expectations for rate cuts—but inflation sentiment is complicating the picture. Here’s what you need to know:

Despite weak consumer sentiment, the market is increasingly sensitive to inflation risks. In fact, inflation expectations are now more in focus than actual inflation.

• U.S. 1-year inflation expectations: Rose sharply from 4.3% to 4.9%
• 5-year expectations: Hit a 30+ year high, reminiscent of the early '90s

These trends matter—because expectations often lead actual inflation. And if they push wages up, rate cuts may become harder to justify.

📉 Key Market Rates:

• Prime Rate: 4.95%
• BoC Policy Rate: 2.75%
• Next BoC Meeting: April 16, 2025

📊 Market odds for April 16 BoC Meeting:

• 25 bps cut: 79%
• 50 bps cut: 21%

BoC Governor Macklem signalled a potential pause last week, but if inflation expectations continue to climb, that pause might stretch longer than markets hope.

🔍 Other Key Notes:

• 90-day arrears ticked up to 0.22%, highest since 2020.
• Leading indicators show Canada's economic outlook is improving—but so is concern over inflation.

If you have any questions about the current market, interest rates, or your mortgage options, don’t hesitate to reach out. I’m happy to help!

Best,

Matt Parker