How the Bank of Canada’s Interest Rate Pause Impacts Your Mortgage in 2025
On June 5, 2025, the Bank of Canada (BoC) held its benchmark interest rate steady at 2.75%, marking the second consecutive meeting without a change. This move, while subtle, carries significant implications for millions of Canadian homeowners, potential buyers, and investors navigating an uncertain economic landscape.
But what does this rate pause really mean for your mortgage in 2025? Let’s break it down.
Understanding the Bank of Canada’s Role
The Bank of Canada sets the overnight lending rate, which influences borrowing costs across the economy—including mortgage rates, especially variable-rate mortgages and home equity lines of credit (HELOCs).
When the BoC raises rates, borrowing becomes costlier. When it lowers rates, it aims to stimulate economic activity. A pause, on the other hand, indicates the Bank is observing how the economy and inflation respond before making its next move.
Why the Bank Paused Rates?
- Persistent Core Inflation: Core inflation rose to 3.15% in April, signaling price pressures haven’t fully eased.
- Economic Resilience: Canada’s GDP grew 2.2% in Q1 2025, showing unexpected strength.
- Global Uncertainty: New U.S. tariff measures are creating trade unpredictability, causing the BoC to tread carefully.
Impact on Your Mortgage: What to Expect
1. Variable-Rate Mortgage Holders: If you have a variable-rate mortgage:
- Your monthly payments will stay the same (if on a fixed payment schedule).
- If you’re on an adjustable-payment variable rate, your interest portion will hold steady.
- The prime lending rate at major banks will also likely remain unchanged—for now.
2. Fixed-Rate Mortgage Shoppers: Fixed mortgage rates are not directly linked to the BoC rate but are tied to bond yields:
- Since markets anticipated the pause, fixed rates have remained relatively stable.
- If inflation drops, bond yields may fall, leading to more competitive fixed-rate offers in the coming months.
3. Renewals in 2025: If your mortgage is up for renewal this year:
- Expect to renew at a higher rate than what you locked in during 2020–2022.
- Use this time to shop around or consult a broker. Even a 0.10% difference matters over 20–25 years.
4. HELOCs and Refinance Loans: HELOCs tied to prime rates will remain unchanged for now.
- However, lenders may still tighten approval criteria due to global uncertainty.
- Refinancing is still viable, especially if consolidating higher-interest debts.
What Should You Do Now?
Review Your Mortgage Terms: Know whether your rate is fixed, variable, or adjustable.
Check Your Prepayment Privileges: Use lump-sum payments or increase regular payments.
Track Economic Signals: The BoC’s next meeting is on July 30, 2025—watch for signs of easing.
The information provided is for educational/entertainment purposes only. Actual information may vary, please consult our office for further details. Got a question? Feel free to reach us at helpdesk@assentt.com.
