The Bank of Canada (BoC) trimmed its policy rate by 25 basis points to 2.25% today—the fourth cut of 2025—signalling continued confidence that inflation pressures are easing and the economy can handle lower borrowing costs. Governor Tiff Macklem also noted that tariffs are weakening Canada’s system and adding friction with the U.S., and that the Bank is focused on helping the economy adjust to this new reality.
Below, we break down what this move means for mortgages, housing, and your next financial decision.
Quick Takeaways
- Overnight rate: Down to 2.25% (-0.25%).
- Variable-rate debt: Payments on variable mortgages and HELOCs are likely to decline as lenders adjust prime rates.
- Fixed rates: Less direct impact—fixed mortgages move with Government of Canada bond yields, which may also soften on easing signals.
- Housing outlook: Lower rates support affordability at the margins, but local supply and employment trends still drive outcomes market-by-market.
How This Affects Your Mortgage
Variable-Rate Mortgages & HELOCs
Most lenders peg their prime rate to the BoC overnight rate. As prime declines, interest costs fall:
- Adjustable-payment variables: Your monthly payment may drop soon after lenders update prime.
- Fixed-payment variables: Your payment may stay the same, but more goes to principal and less to interest.
Fixed-Rate Mortgages
Fixed terms are priced off 5-year GoC bond yields. If bond markets anticipate more easing or slower growth, yields can decline and fixed rates may follow—but not always one-for-one. It’s smart to hold a rate while you shop options.
Renewals, Purchases, and Investors
Renewing in the Next 6–12 Months
- Consider shorter terms (1–3 years) if you expect additional cuts and want flexibility.
- If you value certainty, a 5-year fixed still offers predictability—just compare penalty structures and prepayment privileges.
Buying or Refinancing
- Lower rates can improve qualification and reduce carrying costs.
- Pair rate strategy with payment buffers (taxes, condo fees, utilities) to keep your budget resilient.
Real Estate Investors
- Cap rates and financing costs are moving pieces. Falling rates improve cash-flow math, but vacancy, rent growth, and local bylaws still rule your pro forma.
- Stress-test deals at +100–150 bps above today’s rate to stay conservative.
What We’re Watching Next
- Inflation & jobs: The BoC will want to see continued progress before accelerating cuts.
- Tariff impacts: Trade frictions can raise input costs, complicating inflation’s path down.
- Bond market reaction: If yields drift lower, fixed mortgage specials could improve.
Lendworth Canada: How We Can Help
- Fast approvals: Streamlined underwriting for residential and commercial mortgages.
- Tailored structures: Bridge loans, alternative lending, and bespoke solutions for complex files.
- Investor guidance: For clients exploring mortgage investments, we’ll walk through risk, return, and structure—clearly and transparently.
Thinking about renewing, refinancing, or purchasing? Get a personalized rate and strategy from a Lendworth advisor today. Your equity deserves more™.