Bank of Canada Drops Policy Rate to 2.25%

The Bank of Canada made its second consecutive rate cut today, dropping the benchmark interest rate by another 25 basis points to 2.25%. With the Bank of Canada lowering its policy rate, we’re now expecting the prime lending rate to sit at 4.45%. This move was widely expected, but what’s more telling is the tone. The Bank is signalling it might now hold steady, despite all the economic noise out there.

The Bank of Canada explained in its rate announcement, “With ongoing weakness in the economy and inflation expected to remain close to the 2% target, Governing Council decided to cut the policy rate by 25 basis points. If inflation and economic activity evolve broadly in line with the October projection, Governing Council sees the current policy rate at about the right level to keep inflation close to 2% while helping the economy through this period of structural adjustment. If the outlook changes, we are prepared to respond. Governing Council will be assessing incoming data carefully relative to the Bank’s forecast.”

Additionally, this new projection carries more risk than usual due to U.S. trade uncertainty. The Bank of Canada now expects these trade disruptions to structurally shrink the Canadian economy, with GDP expected to be 1.5% lower by the end of 2026 than it would have been without the tariffs.

Why Interest Rates Matter to You:

• Mortgages & Debt: Lower rates = cheaper borrowing. Great news if you’re buying a home, renewing your mortgage soon or carrying a variable-rate mortgage. Run the numbers with my mortgage calculator >>
• Investments: Markets move with rate expectations. Bond yields, stock prices, and even the loonie all react.
• Cost of Living & Wages: Inflation eats into your wallet. If your income doesn’t keep up, everything starts to feel more expensive.
• Business & Jobs: When rates are uncertain, businesses often pull back on investment or hiring, further slowing the economy.

How to Protect Yourself:

• Be Flexible: Don’t overextend yourself with debt, especially if your income isn’t rock-solid.
• Run the Numbers: Ask yourself “what if rates rise?” Or if your income dips? Would you be OK?
• Stay in The Loop: The more you understand what’s driving rate changes, the better you can plan, pivot, and stay ahead.

So, what does this mean for homeowners or soon-to-be buyers? A softer rate environment opens the door for buyers, but timing and strategy matter more than ever.

If you’re thinking about purchasing, refinancing, or just want to make sure your mortgage is still working for you (not against you), this is a great time to reassess. A well-timed move now could save you thousands in the long run, especially if rates shift again down the road.

If you’re wondering whether it’s time to act, adjust, or just take a fresh look at your mortgage game plan, I’m happy to walk you through it. 

The next Bank of Canada rate announcement is scheduled for December 10, 2025.