But Canadian homebuyers are asking the big question: does a Fed rate cut mean mortgage rates in Canada will fall too?
The answer isn’t so simple. Let’s break it down.
Do Fed Rate Cuts Lower Mortgage Rates in Canada?
Not directly. The Federal Reserve doesn’t set Canadian mortgage rates. Here at home, the Bank of Canada (BoC) makes that call. However, U.S. rate moves often ripple across the border because global investors, bond yields, and economic sentiment are all interconnected.
Mortgage rates in both countries tend to follow the 10-year government bond yields, not the Fed rate itself. When U.S. bond yields drop on Fed policy shifts, Canadian yields often follow — pushing mortgage rates lower here, too.
Mortgage Rates Are Already Easing
The average U.S. 30-year mortgage rate recently fell to 6.35% — its lowest in nearly a year, and Canadian fixed-rate mortgages have been easing as well. But here’s the catch: just because the Fed is cutting doesn’t mean mortgage rates will continue to decline.
Last year, even after multiple Fed cuts, mortgage rates rose again within months. Why? Inflation pressures, bond market volatility, and investor sentiment overpowered the Fed’s influence.
Where Could Mortgage Rates Go Next?
Most economists expect Canadian mortgage rates to hover in the low 6% range for the rest of 2025. Forecasts suggest they’re unlikely to dip below 6% this year unless inflation cools significantly or economic weakness forces deeper cuts by the BoC.
That means homebuyers may see some short-term relief — but affordability challenges remain.
What It Means for Canadian Homebuyers
Lower rates are welcome news for anyone looking to buy or refinance. A drop of even half a percentage point can save homeowners thousands over the life of a mortgage. But with home prices still elevated across Canada, affordability continues to be the bigger barrier.
“While lower rates bring some buyers back into the market, it’s not enough to fully solve affordability,” says Bright MLS economist Lisa Sturtevant. “We’ll need both lower rates and slower price growth to unlock the housing market.”
Should You Buy or Wait?
Timing the market is nearly impossible. If you can comfortably afford a home at today’s rates, locking in now may be smarter than waiting — especially if competition heats up when more buyers return.
Refinancers should consider moving if they can drop their current rate by at least 1%, which typically offsets closing costs.
The Bottom Line for Canadians
The Fed’s rate cut may nudge Canadian mortgage rates lower, but don’t expect dramatic changes overnight. With inflation still sticky and housing costs high, affordability challenges remain the defining story of 2025.
At Lendworth, we help Canadians navigate shifting interest rate cycles with competitive, equity-based mortgage solutions designed for today’s uncertain market. Whether you’re buying, refinancing, or investing, our team ensures you’re positioned for success in any rate environment.
📞 Contact Lendworth Canada today to explore mortgage options that work for you.