Interest Rate Outlook: Fall 2025
As we move into the second half of 2025, Canadian interest rate watchers are closely monitoring the Bank of Canada (BoC) for cues on where borrowing costs are headed. After aggressive rate hikes in 2023 and early 2024 followed by measured cuts earlier this year, many clients are now asking: Will rates fall further this fall—or are we staying put for a while?
Where we stand now
The BoC’s current overnight rate sits at 2.75%, following two consecutive 25-basis point cuts earlier in the year. Inflation has cooled significantly, with core CPI trending toward the 2% target, and wage growth showing signs of stabilizing. However, economic growth has slowed, and consumer spending is softening in key sectors. The central bank is walking a tightrope: cut too fast, and inflation could reheat; hold too long, and Canada risks a deeper-than-expected slowdown.
Fall Rate Forecasts
Most economists are predicting 1–2 more modest rate cuts by December, bringing the overnight rate to 2.25%–2.50%. However, a full return to ultra-low rates is not expected.
Short-term rates (e.g. lines of credit, variable mortgages) may edge down slightly.
Long-term fixed mortgage rates are already pricing in future cuts, and may remain stable or even fall modestly. GIC and savings rates could start to decline slightly by late Q4, so now may be a good time to lock in attractive rates.
What Should You Be Doing?
- Homeowners & Borrowers: If you’re carrying variable-rate debt, you may see some relief this fall. But avoid betting on rapid declines—plan with caution. For fixed-rate mortgages, this could be a good opportunity to compare renewal offers.
- Investors: Lower rates tend to support dividend stocks, REITs, and growth sectors. However, market volatility could increase if rate cuts signal broader economic weakness.
- Business Owners: Consider reviewing lending terms now. If you’re planning expansion, equipment purchases, or refinancing, this fall may offer a strategic entry point.
- Savers & Retirees: If you rely on fixed-income products, review GIC ladders and bond portfolios proactively. Locking in decent rates now could help weather future declines.
In Conclusion, the Interest rates may continue to ease gradually through the fall, but the days of emergency-level lows are behind us. Instead of waiting for a dramatic shift, it’s smart to act within this window of relative stability. Whether you’re looking at mortgage renewals, refinancing, or investment adjustments, the current environment still offers room to make proactive moves.
This is also a good time to check the alignment between your goals and your financial strategy. Are you holding too much cash? Is your debt structured tax-efficiently? Are you prepared if rates don’t drop further? These are strategic conversations worth having now. A brief planning session this fall could make a lasting difference as we head into 2026 with greater clarity and resilience.
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.
