The Bank of Canada lowered its key overnight interest rate to 2.25%, making the prime lending rate 4.45%. While the Bank isn’t ruling out further cuts, it’s now in “watch and wait” mode, closely monitoring economic data as it comes in.
Inflation: Slowing but Still Sticky
- Headline CPI inflation is now at 2.4%, moving closer to the Bank of Canada’s target range (1%–3%).
- However, core inflation measures remain elevated, indicating broad-based price pressures.
- Translation: while things are cooling, we’re not out of the woods yet.
Growth Outlook: Slower Days Ahead
- The Bank of Canada expects weak GDP growth through the second half of 2025, with only modest improvement beyond that.
- Structural economic drag from U.S. tariffs and rising unemployment (up 100,000+ since January) are contributing to this downshift.
Fixed Mortgage Rates
The Bank of Canada rate announcement does not affect fixed mortgage rates. They are likely staying in the same range as of today.
- Bond yields, which drive fixed mortgage rates, have already priced in most of the BoC’s earlier cuts. Unless inflation surprises to the upside again, there’s limited upward pressure right now.
- Core inflation remains sticky, so lenders will be hesitant to aggressively lower rates until that cools more meaningfully.
- Global uncertainty (particularly U.S. trade policy and economic slowdown) adds a layer of caution for rate-setters.
- Renewal risk is growing as many Canadians are coming off ultra-low pandemic-era rates, and lenders know borrowers are rate-sensitive right now.
We’ll likely see slight downward movement in fixed rates through early 2026 if inflation continues to ease and bond yields cooperate.
Today’s announcement isn’t a dramatic move, but it’s important. The Bank of Canada is waiting to see how inflation and global uncertainty shake out. For borrowers, buyers, and homeowners, that means opportunity with a side of caution.
If your renewal is coming up in the next 12–18 months, it’s time to get proactive. Let’s talk about rate strategies, budget planning, and options to keep your mortgage working for you, not against you. If you’d like to understand how today’s rate news affects your specific situation, I’m here to help break it all down.
The next Bank of Canada rate announcement is on December 10, 2025.
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