Canada's so-called "mortgage renewals cliff" might be manageable, thanks to recent rate cuts by the Bank of Canada. With a 75 bps drop through September and an additional 50 bps in October, many mortgages won’t renew at higher rates next year. Royal Bank economists predict only a modest increase in total mortgage payments, about 0.1% of total household disposable income in 2025, as amortizations are extended.
Job Market Trends
September saw a slight dip in the jobless rate to 6.5%, but this is still above pre-pandemic levels and could hit 7% next year. Job openings are also down by 25% from a year ago, signaling potential further increases in unemployment if this trend continues. In previous cycles, a surplus of job vacancies cushioned the economy, but that buffer is weakening.
Economic Growth and Hiring
Canada’s economic growth has been sluggish, with Q3 data suggesting growth of around 1.3%—far below the BoC’s expectations. Hiring intentions remain low, especially as population growth surges. Small and medium-sized businesses are increasingly concerned about falling demand.
Business Climate and Start-ups
Business start-ups are on the decline, with fewer active companies and a notable drop in private sector vacancy rates, which are at their lowest since 2016. Many businesses feel the pinch of restrictive monetary policy, with the number of active companies stalling since 2022 due to the steep rate hikes.
The BoC’s Response
Alex argues that the Bank of Canada needs to consider more aggressive rate cuts to alleviate economic pressures. According to the latest BoC Business Outlook Survey, hiring intentions remain below average, and a significant number of companies are now overstaffed.
This in-depth look from Alex paints a complex picture of an economy grappling with high rates and slowing growth.
Alexander Gasenko - your trusted Toronto & GTA mortgage broker. Dominion Lending Centres Maple Mortgage Group Independently Owned & Operated — FSRA# 13415