Do you have a variable-rate mortgage or a home equity line of credit? The Bank of Canada has announced a rate cut—its key interest rate is now 2.75%, and the prime lending rate is now 4.95%, down 0.25%. When the key interest rate drops, your monthly payments can follow suit. Imagine what you could do with a little extra room in your budget or how great it would feel to know more of your payments are going directly toward reducing your principal.
Lower variable rates also mean increased affordability for homebuyers. This isn’t just about a better rate—it’s about empowering more buyers to enter the market. Remember, buying power isn’t determined by interest rates alone. It also hinges on home prices, your income, and lending criteria.
Lower rates can boost the housing market by making borrowing more affordable, attracting more buyers, and increasing competition for homes. However, fixed-rate mortgages follow bond yields, not the prime lending rate. Canada’s 10-year government bond yield climbed to 3.04% after reaching a two-year low of 2.83% on March 3rd. Investors are demanding higher returns, likely driven by trade tensions and economic uncertainty.
Canada’s economy kicked off in 2025 on solid footing, but new U.S. tariffs and trade tensions could slow growth and increase prices. While inflation remains near the 2% target, uncertainty looms over the months ahead.
Global markets are shifting, U.S. growth is cooling, European expansion is modest, and China’s economy stays strong with government support. Meanwhile, oil prices have dipped, bond yields have eased, and the Canadian dollar is steady against the U.S. but weaker against other currencies.
At home, job growth surged late last year but stalled in February. Wage growth is levelling off, and businesses are feeling the strain of ongoing trade uncertainty. Inflation is expected to rise slightly in the coming months as tax breaks expire and shelter costs remain high.
Monetary policy can’t stop the effects of a trade war, but it can help keep inflation in check. The Bank of Canada is watching closely, with the next rate announcement set for April 16, 2025.
