Rate Update: What’s Really Going On

The Bank of Canada held its policy rate steady at 2.75%, catching many by surprise. Economists had been predicting a few more cuts this year, but it seems the Bank is keeping a cautious stance amid ongoing global uncertainty. As a result, the prime lending rate—which influences variable-rate mortgages, lines of credit, and HELOCs—remains at 4.95%.

Here’s how the Bank explained its decision:
“Governing Council is proceeding carefully, with particular attention to the risks and uncertainties facing the Canadian economy. These include: the extent to which higher US tariffs reduce demand for Canadian exports; how much this spills over into business investment, employment and household spending; how much and how quickly cost increases are passed on to consumer prices; and how inflation expectations evolve.”

What does this mean for fixed mortgage rates? Despite the Bank holding its rate, fixed rates have been creeping up. That’s because fixed rates don’t follow the Bank of Canada’s overnight rate—they’re influenced by the bond market, especially the 5-year Government of Canada bond yield. When those yields rise, so do fixed rates.

Some of our country’s top economists are still predicting rate cuts may still be on the horizon later this year—but we’re not there yet. For now, the advice is to stay patient, stay informed, and hold tight if you want to change your variable-rate mortgage to a fixed rate.

If you’re buying, renewing, or just want to make sure your mortgage strategy is still on point, let’s chat. I’m always happy to help you navigate the shifts with clarity and confidence.

The next Bank of Canada announcement is scheduled for Wednesday, July 30, 2025—I’ll keep you posted.