The Bank of Canada has lowered its key interest rate by 0.25% as of January 2025, bringing it down to 3%. As a result, Canada’s prime lending rate—affecting variable-rate mortgages, lines of credit, and HELOCs—will decrease from 5.45% to 5.20%.
What Does This Mean for You?
Variable-Rate Mortgage Holders: Clients with existing variable-rate mortgages will see a small reduction in their payments after this rate announcement.
New Mortgage Applicants: A lower key interest rate does not necessarily mean lower fixed mortgage rates. Fixed mortgage rates are tied to bond yields, which move independently of the Bank of Canada’s rate decisions. Additionally, after the previous Bank of Canada rate cut, lenders reduced the discounts offered on variable rates, meaning new variable mortgage borrowers were being offered higher rates.
If you’re debating between a fixed or variable mortgage, now is the time to reassess your options. While fixed rates provide stability, variable rates could offer savings over time—depending on future rate trends.
The Bank of Canada has signalled that further rate cuts may be on the horizon, but this will depend on inflation trends and economic performance. If inflation continues to ease and economic growth slows, we could see additional rate cuts later in the year. These developments could influence future interest rate decisions and the broader economic outlook.
Interest rate changes can impact your mortgage strategy, whether you’re renewing, refinancing, or purchasing a new home. If you’re wondering how this rate drop affects you—or whether now is a good time to make a move—let’s chat! I’m here to help you navigate your mortgage options with confidence.
The next rate announcement is scheduled for Wednesday, March 12, 2025.
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