Good news may be coming from the Bank of Canada (BoC) for people with variable mortgages and those looking to purchase a home.
According to some experts, the BoC is likely to drop interest rates by 25-points at their announcement scheduled for Wednesday, October 29th.
In September, the BoC once again dropped the overnight interest rate, this time, to 2.5%.
For those unfamiliar, the overnight interest rate is the target rate at which major financial institutions borrow and lend funds to each other for one-day loans.
This influences the overall cost of borrowing in the Canadian economy, including interest rates on mortgages, loans and savings accounts.
This interest rate has a tangible impact on the rate of inflation by encouraging or discouraging economic growth through consumers’ borrowing and spending.
According to Ratehub Mortgage expert Penalope Graham, the BoC would be smart to lower the current overnight interest rate as business continues to be low, the economy is sputtering and ongoing international trade continues to be squeezed.
“While the most recent September inflation numbers surprised on the upside, the core measures that the BoC looks to barely budged, indicating inflation growth isn’t broad; rather, the uptick in the headline number is largely due to base-effect gas prices,” said Graham.
“Meanwhile, oversized contributors such as mortgage interest costs, continued to decrease. This most recent print likely won’t be enough to dissuade from another cut.”
She says that whether or not the BoC will cut the rate further in 2025 will depend on the data available and overall economic capacity.
Additionally, Graham noted that if there is no cut in October, it is much more likely that another cut will be coming in December.
However, when looking forward to the new year, she believes that the market is a bit more unpredictable at the moment.
“The 2026 rate outlook is less certain; the risks from the evolving trade scenario still present inflation headwinds, especially if CUSMA [Canada-United States-Mexico Agreement] is not renegotiated in Canada’s favour,” said Graham.
“The chance that rates could point higher again in the latter half of the year is a possibility that can’t be ruled out.”
Ultimately, Graham says that weaker jobs in Canada, ongoing tariffs and mounting inflation are all compelling reasons for the BoC to cut the interest rate by 25-points.
According to Ratehub, a home buyer who put a 10% down payment on a $948,072 home—the current average cost of a home—with a five-year variable rate of 3.79% over 25 years would have a monthly mortgage payment of $4,528.
This monthly mortgage payment figure is down from $4,579 per month in September, in part due to the BoC lowering the interest rate.
