The Bank of Canada (BoC) announced today they would be holding the key overnight interest rate at 2.25%.
This interest rate is also often called the policy interest rate, key interest rate or target rate.
Essentially, it acts as the benchmark cost of borrowing set by the central bank.
When the rate is updated—either dropped or increased—it influences the interest rate that lenders use for variable loans, lines of credit and mortgages. This means that potential homebuyers may get a cheaper loan if this rate is lower.
Since April 2024, this rate has been slowly cut by the Bank of Canada, from 4.75% to the 2.25% it is today.
Mortgage experts from Ratehub.ca predicted the rate would be held, as global uncertainty rises.
“The Bank of Canada has indicated it’s on standby, as it monitors how the conflict in the Middle East impacts Canadian economic growth and inflation,” said Penalope Graham, financial analyst with Ratehub.
“The latter is of particular focus, as the Bank anticipates that inflation risks will increase in the near future, in tandem with higher energy prices.”
She added that overall, policymakers have indicated that it’s “too early” to respond to this new geopolitical pressure, but the possibility of rate hikes is very much back on the table.
On what this interest rate announcement will mean for mortgages, Graham says it will certainly not inspire immediate purchasing.
“While a prolonged rate hold means zero relief for home shoppers holding out for lower rates, those who already have floating-rate mortgages will continue to benefit from continued stability,” she explained.
“Depending on the type of variable-rate mortgage you have, neither your monthly payment, nor the portion of that payment that services interest, will change.”
Currently variable-rate pricing is at a low of 3.35%, which remains the lowest it has been since the summer of 2022.
She noted that fixed mortgage rates are not directly impacted by the Bank’s rate decisions, but will nevertheless feel upward pressure.
According to the Canadian Real Estate Association (CREA), home prices have been increasingly softened over the past few months.
CREA’s data shows that the fear of job loss and tariff pressures have been the largest impacts on home sales since President Donald Trump announced his tariffs.
The next BoC rate announcement will be coming on April 29th.
