Mortgage Blog

With Inflation at 1.7%, What This Means for Canadians Considering a Home Purchase or Mortgage Refinance

August 19, 2025 | Posted by: Steven Hencze

Did You Know?

Did you know that Canada's latest inflation figure has cooled to 1.7% according to Statistics Canada? For everyday Canadians, this is more than a headline. It can point to lower borrowing costs, steadier home prices, and fresh opportunities to either buy your first home or restructure an existing mortgage to save money.

Attention: Why Inflation Matters for Homebuyers and Homeowners

When people hear "inflation," they often think about grocery bills or the price of gas. Inflation also shapes mortgage rates. Here is the simple link:

• When inflation runs hot, the Bank of Canada raises interest rates to cool spending, and borrowing gets more expensive.
• When inflation cools, as it has now to 1.7 percent, mortgage rates tend to ease over time, which can improve affordability.

This shift signals an opening for Canadians who have been waiting. If you have been on the sidelines, the window to buy or to refinance may be wider than it has been in years.

Interest: How Lower Inflation Creates New Possibilities

With inflation below 2 percent, the Bank of Canada has more room to hold or trim rates in upcoming decisions. That matters because:

• First-time buyers: Lower rates can reduce monthly payments, help you qualify for more, or simply give you breathing room.
• Current homeowners: If your renewal is coming up, you may be able to lock in a lower rate than what was available last year.
• Upsizers and investors: Improved affordability can make it easier to move up or add a property.

Illustrative example: On a $450,000 mortgage, a 1 percent lower rate can trim payments by roughly $250 per month depending on amortization and term. Over five years, that can approach $15,000 in potential savings. This is a simplified example, and actual results depend on your exact mortgage details.

Desire: Why Acting Now Can Pay Off

Opportunities like this rarely last. In many markets, prices have stabilized. When rates drift lower, demand often picks up, which can nudge prices higher again. Getting organized now helps you stay ahead of the next wave of buyers.

This is where a dedicated mortgage team helps. We compare lenders, evaluate products, and build a clear strategy for your goals. That might mean a shorter term to keep flexibility, a fixed rate for payment certainty, or a refinance that consolidates higher interest debt. Small adjustments can lead to meaningful savings and less stress.

Clients often tell us they thought refinancing would be complicated or that they would not qualify for better terms. Once we review the numbers, we frequently uncover a path that reduces payments or shortens the time to become mortgage-free.

Action: Three Steps To Take Today

1. Review your current mortgage. If renewal is within the next 12 to 18 months, start now. Many lenders allow a rate hold well in advance.
2. Get pre-approved if buying. Locking in a rate protects you if rates tick up while you shop.
3. Speak with a trusted mortgage professional. Every situation is unique. A quick strategy session can confirm if you are leaving money on the table.

Stats Snapshot: Inflation, Rates, and Housing

• Inflation: Statistics Canada reports the July 2025 Consumer Price Index at 1.7% year over year.
• BoC perspective on renewals: The Bank of Canada notes that many households renewing in 2025 and 2026 will still see payment increases versus 2024 levels, although pressure eases as rates drift lower.
• Market activity: CREA reported July 2025 home sales up on a monthly basis with the national benchmark price holding steady.
• Example retail rates: Major bank special offers for 5-year fixed are posting in the high 4s, subject to borrower profile and conditions.

These data points suggest affordability conditions are improving while the overall stress on renewals varies by household. Verifying your specific numbers is the best next step.

Top 10 FAQs About Inflation and Mortgages in Canada

1) What does 1.7 percent inflation mean for my mortgage?

Lower inflation signals less upward pressure on interest rates. It can support stable or lower mortgage rates over time, which benefits new buyers and those exploring a refinance.

2) Will mortgage rates drop further if inflation stays low?

There is no guarantee. Historically, cooler inflation gives the Bank of Canada more flexibility to trim policy rates if broader data supports it. Market expectations will shift as fresh data arrives.

3) Should I choose a fixed or variable mortgage right now?

It depends on your tolerance for payment changes, your timeline, and your budget. Fixed provides certainty. Variable can benefit if rates decline. We model both options to show total interest, payment paths, and renewal scenarios.

4) Is now a good time to refinance?

If you are holding a rate that is materially above current offers, a refinance can reduce interest costs or consolidate higher interest debt. The math must include penalties, legal costs, and your timeline. We run the full comparison for you.

5) How does low inflation affect home prices?

Lower rates often increase buyer demand, which can add price pressure. If you find a home that fits your budget and needs, acting sooner can help you secure value before momentum builds.

6) I renewed last year at a higher rate, do I have options?

Possibly. If the projected savings outweigh penalties, a mid-term refinance might make sense. Lender policies vary. A quick review can confirm.

7) How does inflation tie into the mortgage stress test?

The stress test uses qualifying rates that move with market conditions. If rates ease, qualifying can become easier at the margin. Your income, debts, and amortization remain key factors.

8) Are first-time buyers benefiting the most?

Many first-time buyers gain from lower monthly payments and rate holds while they shop. Good preparation still matters, including down payment planning and a clear budget.

9) Should I wait for inflation to fall even further?

There is always a trade-off. Waiting for a slightly lower rate can mean competing with more buyers later. Locking in a rate hold gives you protection and time to shop.

10) How can a mortgage broker help right now?

We compare multiple lenders, negotiate terms, and tailor a structure that fits your goals. You get clarity, speed, and a plan that evolves with market data.

Closing Thoughts

Inflation at 1.7 percent is a welcome sign. For Canadians, it can mean fresh pathways to buy a home or to cut borrowing costs through a refinance. Conditions are improving, yet markets move quickly. A short conversation can confirm if now is the right moment for you to act with confidence.

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