When recessions hit in the past, the Bank of Canada slashed interest rates to historic lows, sending mortgage costs tumbling. Could 2025 bring us back there again?
The short answer: don’t count on it.
Why Canadians Are Asking About Rock-Bottom Rates
Mortgage rates carry a certain allure when they plunge. We’ve seen this movie before:
- 2008/09 Financial Crisis – The Bank of Canada cut its policy rate from 4.5% to just 0.25%, holding it near zero for years. Variable rates followed suit, while fixed rates dipped to the low-2s by the mid-2010s.
- 2020 Pandemic Crash – Lockdowns froze the economy, and emergency stimulus pulled rates down again. By late 2020, five-year fixed rates hit a record-low 1.45%, saving borrowers thousands.
Both cases share a common theme: extraordinary economic shocks.
2025: Tariffs, Job Losses, and a Slowing Economy
This year, Canada’s GDP shrank 1.6% in Q2, unemployment climbed to 7.1%, and tariffs are squeezing businesses and consumers alike.
The trade war with the U.S. is hitting exports hard, and business investment has dropped by 10%. While spending by households remains surprisingly resilient, recession signals are building.
The big question: is this enough to send rates crashing back to zero?
What the Experts Say
Most economists — and industry leaders — agree the answer is no.
Why? Because unlike 2008 or 2020, this downturn hasn’t yet sparked a full-scale collapse in demand. Inflation remains sticky in some areas thanks to tariffs and supply disruptions, limiting how far the Bank of Canada can cut.
Realistically:
- A mild recession could see rates fall from 2.75% today toward 2.0%–2.25%.
- A severe recession, with unemployment above 8% and multi-quarter GDP contraction, could force the Bank closer to its 0.25% “floor.”
But that scenario would require a much deeper shock — beyond today’s slowdown.
The Bottom Line for Borrowers
Yes, recession talk is real. Yes, mortgage rates could edge lower. But Canadians shouldn’t expect a return to pandemic-era bargains anytime soon.
The last two times rates hit rock bottom, it took a global financial crisis and a once-in-a-century pandemic. Today’s slowdown is serious, but not yet catastrophic.
How Lendworth Canada Can Help
Whether you’re:
- Renewing your mortgage and worried about higher payments,
- Buying a home in a cooling market with more negotiating power, or
- Exploring investment opportunities as rates shift…
👉 The expert team at Lendworth Canada is here to help you find the best financing solutions available. Our equity-based mortgage strategies, competitive rates, and personalized advice are designed to keep you ahead — no matter what the market throws at us.
📞 Contact Lendworth today and let us show you how to save thousands on your mortgage.