What Was the Announcement?
As expected, the Bank of Canada reduced its overnight rate by 0.25%. This brings the benchmark rate to 2.50%, and we’ve now seen eight rate cuts since June.
As a result, the prime rate has dropped from 4.95% to 4.70%, providing immediate relief for borrowers with variable-rate mortgages and home equity lines of credit.
The Bank highlighted several key factors influencing its decision:
Weaker Economic Data: Recent job numbers showed a loss of 60,000 jobs across Canada. Business confidence is falling, and the impact of global trade disruptions is starting to surface more clearly in domestic data.
Inflation Remains Stable: Inflation is holding steady and appears well-contained. The recent removal of retaliatory tariffs against the U.S. is helping reduce inflation pressure.
Global Trade Tensions: With ongoing uncertainty surrounding U.S. trade policy—and renegotiation of the Canada-U.S.-Mexico (CUSMA) agreement on the horizon—future growth remains unpredictable.
The Bank signaled that if the current trends hold, another rate cut is expected in October.
How Does It Impact You?
Variable-Rate Borrowers:If you have a variable-rate mortgage or a home equity line of credit, today’s rate cut means you’ll be paying less. On a $500,000 mortgage, the savings could amount to roughly $100/month, depending on your lender and remaining amortization.
Fixed-Rate Borrowers:If you have a fixed-rate mortgage, your rate and payment remain unchanged. However, today’s rate cut and the weaker economic outlook could put further downward pressure on fixed mortgage rates over the coming months—particularly if bond yields continue to decline.
New Buyers & Renewals:Now may be an ideal time to review your mortgage strategy. Historically, rate cut cycles don’t stop after a single cut. If you're nearing renewal or considering a purchase, we’re happy to walk you through options that balance short-term flexibility with long-term rate protection.
What’s Next?
We’ll be watching a few key developments over the coming months:
October Rate Decision: Another 0.25% cut is widely expected if current economic data continues.
Federal Budget (Nov 4): Increased government spending could change the outlook depending on how it impacts growth and inflation.
CUSMA Renegotiation: 85% of Canadian trade is protected under this agreement, but key industries like steel, aluminum, and auto manufacturing remain vulnerable. Without clarity by mid-2026, further rate cuts could follow.
Quick Refresher: VIP Mortgage Management Program
Just a reminder that many of our clients are now enrolled in our VIP Mortgage Management Program — a monthly review service that includes:
✔️ Updated estimates of your property value
✔️ Monthly reviews for interest-saving refinance opportunities
✔️ Move-up potential analysis based on your equity and the current market
If you haven’t joined yet and would like to receive these monthly updates, reply to this email and we’ll get you added.
Have Questions?
If you’re wondering how this rate cut impacts your specific mortgage or if you want to explore refinance or renewal opportunities—we’re here to help.
