Rate hike odds jump to 80%. Lenders see more broker growth.

Key facts this week

1. A rate hike suddenly looks likely

Last Saturday, traders on Polymarket and Kalshi gave the Bank of Canada about an 18% chance of raising rates on October 28. By Thursday that was over 80%, and it ended the week at about 80%.

What's strange is that the inflation report didn't do it. September inflation came in at 3.1%, a touch under the 3.2% economists expected, and the core measures the Bank watches most closely actually eased, to 1.8% and 1.9%. (Statistics Canada, CMT)

The real nudge was a question. Speaking to reporters at the IMF meetings in Bangkok on Saturday, Governor Tiff Macklem wondered aloud whether inflation would drift back down on its own or whether the Bank would have to step in.

"Is inflation likely to come back down towards our target on its own, or are we going to have to raise interest rates to influence the path?" Governor Macklem, Oct 17, via Global News

Then the Bank's own surveys landed on Monday, showing that consumers now expect long-term inflation to run as hot as the short term. BMO, RBC Dominion Securities and Desjardins switched to a hike call. By Friday, a Reuters poll of 34 economists had 19 expecting a hike to 2.50%. In the poll before it, 80% had expected the Bank to hold through the end of 2026. We'd put it this way: with core inflation easing, a hike would be about what people expect prices to do, not what they're doing today.

Bond yields, which fixed mortgage rates tend to follow, went the other way. The five-year yield slipped from 3.64% on Monday to 3.50% on Thursday.

2. Lenders are lining up for brokers

Down in Calgary, the lenders at the Mortgage Professionals Canada conference (October 17 to 19) were bullish about brokers. Nesto's Malik Yacoubi said they expect to grow broker business by another 50% next year. TD is aiming for double digits, Manulife for a third straight record year, and BMO, which only moved into Western Canada and Quebec this year, sees more room. Most of it, they said, will come from renewals, switches and refinances, not a rebound in buying. (CMT)

"A rate sheet that we publish on Monday might be completely irrelevant by the time you get to Wednesday." Katy Boshart, president and CEO, Manulife Bank, via CMT

And a new name wants in. Northguard Financial, which says it will work only with brokers, announced this week that it plans to launch across Canada in 2027, starting in Quebec and Eastern Canada in the first quarter. It isn't planning a cap on how many brokers it works with. (CMT)

For the banks, part of the draw is what comes after the mortgage. Scotiabank says 40% of its broker clients become primary banking customers within six months, compared with 31% to 32% in its own channels. TD's Scott Belton, though, warned that more rate hikes could cut into demand: "I don't think we're out of the woods yet."

3. Regulators are watching the growth

All that growth has caught the eye of the people who license brokers. In its October 22 bulletin, Ontario's FSRA told mortgage brokerages it will spend the next 12 to 18 months reviewing how they recruit, looking at whether they're bringing in agents and brokers who are suitable to stay licensed. The bulletin's first article is headlined "Recruit for quality, not quantity." (FSRA) In Calgary, TD's Belton also took aim at OSFI's loan-to-income limit, calling it "a bit more blunt instrument of a regulation" than TD would like. (CMT) Put together, it's more lenders competing for broker volume, and more questions about who those brokers are and how their files get underwritten.

More from the week

• National Bank's Stéfane Marion told the Calgary crowd "there's no such thing as a national market for the housing sector," and noted that population growth has fallen from about 1.2 million people a year to about 200,000. (CMT)
• In the GTA, builders sold just 129 high-rise homes in September, the lowest September on record. (Storeys, pre-construction data)
• Ontario said it will roll out optional digital ID, starting with the Photo Card. (Ontario Newsroom)

What to expect next week

Wednesday is the big one. The Bank of Canada announces its decision at 9:45 am ET and releases its Monetary Policy Report the same morning. The rate is 2.25% today. If it goes to 2.50%, a payment that moves with the Bank's rate would rise about $70 a month on a $500,000 mortgage (25-year amortization, 4.5% starting rate). Fixed payments won't change until renewal. If the Bank holds, the next decision is December 9.

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