Breaking Now - Big Updates in Interest Rate by Bank of Canada, Here's what you should know.

Bank of Canada Lowers Policy Rate

On September 17, 2025, the Bank of Canada (BoC) cut its benchmark interest rate by 25 basis points, bringing the overnight lending rate down to 2.5%. This marks the first rate cut since March and the third adjustment this year, following a pause through spring and summer.

The Bank Rate is now 2.75%, while the deposit rate stands at 2.45%. Canada’s major banks, including RBC, BMO, TD, and CIBC, have already lowered their prime rates by the same amount — from 4.95% to 4.7%, effective September 18, 2025.

Why Did the Bank of Canada Cut Rates?

Several economic factors pushed policymakers toward easing:

Weakening labour market: Job losses have been concentrated in trade-sensitive sectors like autos, steel, and aluminum, while hiring elsewhere has slowed.

Trade disruptions: U.S. tariffs on Canadian goods and Chinese restrictions on canola, pork, and seafood have dented exports and business investment. Exports dropped 27% in Q2 2025 after an earlier spike.

Slowing GDP growth: Canada’s economy contracted by about 1.5% in Q2 as global trade tensions weighed on activity.

Inflation momentum fading: Consumer prices rose 1.9% in August (year-over-year), while core inflation is around 2.5%. The removal of retaliatory tariffs has reduced upside inflation risk.

Housing and consumption: While housing activity and consumer spending were stronger than expected in Q2, low population growth and weaker employment could weigh on households ahead.

Governor Tiff Macklem emphasized that while growth is slow, “we are not expecting a recession.”

Economists React: Will More Cuts Follow?

While the rate cut was widely anticipated, economists are divided on what comes next:

Scotiabank’s Derek Holt: Calls the Bank’s tone “careful, cagey, non-committal.”

RBC’s Claire Fan: Believes “additional easing is likely” as the Bank rarely cuts rates just once.

BMO’s Douglas Porter: Thinks the Bank is “not keen on a follow-up cut,” pointing to December or March 2026 as more likely.

National Bank’s Taylor Schleich: Projects another cut in October, noting that “a single cut is extremely rare.”

The policy rate now sits in the lower half of the BoC’s neutral range, giving room for more cuts if the economy continues to weaken.

What This Means for Canadians

The interest rate cut has immediate and long-term implications for borrowers, homeowners, and businesses:

Lower Borrowing Costs: Variable-rate mortgages, lines of credit, and personal loans tied to prime rates will see reduced interest costs.

Refinancing Opportunities: Homeowners may benefit by refinancing at lower rates, lowering monthly payments or paying down principal faster.

Renewals & New Homebuyers: Those renewing mortgages may find more favorable terms. New buyers could also lock in lower rates, potentially boosting housing demand.

Economic Outlook: Lower rates may support consumer spending and housing, but uncertainty over trade policy and employment means cautious optimism.

Next Steps: October Decision & Federal Budget

The next Bank of Canada interest rate announcement is scheduled for October 29, 2025, alongside its Monetary Policy Report. A week later, on November 4, 2025, the federal budget will provide more clarity on fiscal measures.

Between now and then, markets will watch:

September’s labour force survey

Latest inflation figures

Q3 Business Outlook Survey

How Home Ease Mortgages Can Help You

At Home Ease Mortgages, we make sure Canadians benefit from opportunities created by changing interest rates.

✅ Mortgage Renewals: Get the best rate options when your term ends.

✅ Refinancing: Lower your payments or consolidate debt at today’s reduced rates.

✅ Purchases: Secure tailored financing strategies if you’re planning to buy.

✅ Expert Advice: We simplify the process, making homeownership stress-free and transparent.

With borrowing costs trending lower, now is the right time to review your mortgage strategy.

📞 Talk to us today and let Home Ease Mortgages guide you toward smarter, more affordable homeownership.