"Measured Confidence": What the Big Banks' Q3 Results Say About Rates This Fall

Image courtesy of CBC News

There are two very different stories being told about the Canadian economy right now. Small business owners are sounding alarms about a full blown trade war with the United States, while our largest banks just posted quarterly results that beat expectations across the board. I spend my days talking to clients about rates, approvals, and renewals, so when the biggest lenders in the country tell us how they read the economy, I pay attention. Here is what stood out to me.

The banks are cautiously optimistic

On August 27, RBC, TD, and CIBC all reported third quarter results before the opening bell on the TSX. Between them, these three institutions carry as much as 6 trillion dollars in assets, with mortgages, auto loans, credit lines, and business lending spread across Canada and the U.S. That gives them a view of the economy that very few organizations have. They are not reading headlines, they are watching how millions of Canadians actually pay their bills.

RBC CEO Dave McKay put it plainly on the bank's conference call, saying the Canadian economy has proven to be resilient, and that improvements in employment and GDP through the second quarter support a cautiously optimistic outlook that the economy will keep expanding. TD and CIBC struck a similar tone. That is a meaningful signal, because banks make money by being right about risk. If they expected a wave of defaults, you would see it in their provisions and hear it in their language.

Why the smaller businesses feel differently

Here is the tension. A large bank with a diversified national loan book can absorb a rough quarter in one sector. A small manufacturer in Ontario shipping parts across the border cannot. Tariffs hit specific industries, specific supply chains, and specific towns very hard, while the national numbers stay respectable. Both things can be true at once. The economy is holding up, and a lot of individual businesses are hurting.

For mortgage borrowers, this matters because it shapes the rate path. Trade friction pushes prices up on goods, which limits how aggressively the Bank of Canada can cut. At the same time, solid GDP and employment data remove some of the urgency to cut at all. Fixed rates are driven by bond yields, which move daily on exactly this kind of news, and variable rates follow the policy rate through prime. So a "cautiously optimistic" economy usually means a slower, shallower path of rate cuts than a lot of borrowers are hoping for.

A real world example

Say you bought a home in Brampton in late 2021 with a five year fixed at 2.19 percent, and your renewal is coming up this winter. You have been sitting on your hands, waiting for one more cut before you commit, because everyone keeps telling you rates are coming down.

Based on what the banks just said, waiting is a bet, not a strategy. If growth stays resilient and tariffs keep goods prices elevated, the Bank of Canada has very little reason to move quickly. Your renewal payment is going up either way, and the real question is how you structure it. Do you take a shorter fixed term so you can reprice sooner if cuts do arrive? Do you go variable and accept the swings? Do you extend your amortization at renewal to protect monthly cash flow while you get through the next couple of years?

Those are all different answers depending on your income stability, your equity position, and whether your job sits in a tariff exposed industry. A client in auto parts and a client in health care should not be making the same decision this fall, even with identical mortgages.

What I would do right now

Start your renewal conversation six months out, not six weeks out. Most lenders will let you hold a rate ahead of time, which gives you a floor while you watch the market. If rates improve, you take the better deal. If they do not, you are protected. That is a free option, and very few people use it.

Also worth doing, run your numbers against a higher payment before you are forced to. If a renewal at current rates would stretch you, there are moves we can make now, from consolidating higher interest debt into the mortgage to switching lenders for a better product. Those options shrink once you are inside the last month.

If you want to know what these results actually mean for your renewal, your purchase plans, or your refinance, let's talk it through together.

Kechanth Kannan | Mr. Mortgage
Phone: +1 (647) 554-2718
Instagram: @_mrmortgage