On January 29, the Central Bank announced it is lowering its lending rate by 25 basis points, bringing it down to 3%.
In its announcement, the BoC said:
"With inflation around 2% and the economy in excess supply, Governing Council decided to reduce the policy rate a further 25 basis points to 3%. The cumulative reduction in the policy rate since last June is substantial."
"Lower interest rates are boosting household spending and, in the outlook published today, the economy is expected to strengthen gradually and inflation to stay close to target. However, if broad-based and significant tariffs were imposed, the resilience of Canada’s economy would be tested. We will be following developments closely and assessing the implications for economic activity, inflation and monetary policy in Canada. The Bank is committed to maintaining price stability for Canadians."
A BoC lending rate cut, in general, can mean interest rate relief for many Canadians.
The central bank’s lending rate influences the interest rate financial institutions charge on products such as mortgages and loans. So, when the BoC’s lending rate goes up, it can become more expensive for Canadians to borrow money. Whenever the BoC cuts its lending rate, it can become cheaper.
For Canadians with variable rate mortgages, rate cuts can mean more of their mortgage payment goes towards the principal of the mortgage, and less towards interest.
For Canadians with fixed rate mortgages, a BoC rate cut does not immediately make an impact. Fixed rate mortgages are commonly based on five-year bond yields.
The looming threat of a 25% tariff on Canadian exports under U.S. President Donald Trump may impact the Canadian economy. If Trump enacts blanket tariffs, it could negatively affect the growth of the Canadian economy. That means the BoC might create a cushion for the economy by accelerating rate cuts.
That said, TD Economics predicts the BoC will cut its lending rate in total by another 100 basis points by the end of the year. That means by the end of 2025, the BoC’s lending rate could sit around 2%.
If you have questions about the rate announcement, or are wondering how it affects you, please reach out and lets chat! jamiewalsh.ca
Jamie Walsh is an experienced and knowledgeable Calgary mortgage broker, and would love to help you with your next mortgage!

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