Bank of Canada Lowers Rate by .25%

The Bank of Canada has officially lowered its key interest rate by 0.25%. This move directly affects variable-rate mortgage holders, offering immediate payment relief. However, with economic uncertainty ahead, particularly regarding potential U.S. tariffs, what does this rate cut mean for the future of mortgage rates in Canada?

Immediate Impact: Lower Mortgage Payments for Variable-Rate Borrowers

With the Bank of Canada lowering its overnight rate, the prime lending rate is expected to drop, which will directly impact those with variable-rate mortgages or home equity lines of credit (HELOCs).

• For every $100,000 owed on a mortgage, monthly payments will drop by approximately $14.
• For a $400,000 mortgage, that translates to nearly $60 in savings per month, or about $720 per year.
• This rate cut follows a series of reductions since June 2024, helping to ease financial pressure on borrowers.

What about fixed rates? Fixed mortgage rates are not directly impacted by the Bank of Canada’s decision. Instead, they are influenced by bond yields, which remain stable for now. However, potential economic shifts could impact fixed rates in the months ahead.

Uncertainty Ahead: U.S. Tariffs & Economic Risks

While lower rates provide relief, economic uncertainty remains, particularly with the potential for new U.S. tariffs. These tariffs could have significant consequences for inflation and mortgage rates in Canada.

• The new U.S. administration has proposed broad-based 25% tariffs on imports, including Canadian goods.
• If imposed, these tariffs could increase costs for U.S. businesses, leading to inflationary pressure.
• Higher U.S. inflation could push the Federal Reserve to maintain or raise rates, indirectly affecting Canadian mortgage rates.
• Higher inflation in the U.S. typically results in increased bond yields, which can put upward pressure on Canadian fixed mortgage rates.

What does this mean for Canadian borrowers? If tariffs are implemented and inflation rises, fixed mortgage rates may remain higher than expected despite the Bank of Canada’s rate cuts.

What to Watch Next: March 12 Rate Decision & Economic Trends

The next Bank of Canada rate announcement is scheduled for March 12, 2025. Here are the key factors to monitor:

• Will inflation remain stable, allowing for further rate cuts?
• Will the U.S. impose tariffs, and how will they impact Canadian economic growth?
• How will Canadian bond yields react to global economic pressures?

For a more detailed breakdown of these developments, watch our latest video for insights on how this rate cut affects mortgage holders and what to expect in the months ahead.

Have questions about how these changes impact your mortgage or refinancing options? Contact us today—we’re here to help.