The Bank of Canada held its benchmark interest rate steady at 2.75% in its most recent announcement, despite rising pressure for rate cuts. 
While there was internal debate over a potential 25-basis-point cut, the decision to hold came down to two key factors: inflation hasn’t cooled as much as expected and the economy is still showing signs of resilience.
Slowing Growth – But No Recession (Yet)
Economic indicators point to a slowdown, but not significant downturn. First-quarter growth slightly beat expectations, thanks to exports and front-loaded business investment. However, warning signs are emerging. Residential investment is soft, unemployment is climbing (now at 6.9%), and housing activity in major markets like Toronto and Vancouver has slowed.
Uncertainty Looms Over Policy Decision
Uncertainty, especially around global trade tensions, continues to cloud the outlook. US tariff risks – such as President Trump’s move to double tariffs on Canadian steel – remain a top concern. This global volatility is making it harder for the Bank of Canada to make confident policy moves.
Fixed Rates: What to Expect
Fixed mortgage rates in Canada closely follow the 5-year Government of Canada bond yield. While longer-term rates (like 30-year yields, which are not available in Canada) are rising due to large US budget deficits, the 5-year yield is expected to remain more stable. According to economist Sherry Cooper, the Canadian economy will flow and the Bank of Canada will take short-term interest rates down, even though the budget deficits could keep upward pressure on longer-term interest rates.
What’s Next?
Several major banks – BMO, National Bank, CIBC, RBC and TD – forecast the Bank of Canada’s overnight rate could drop to between 2% and 2.25% by the end of 2025. While Scotiabank predicts no change. The general consensus points toward likely interest rate cuts, which could benefit both Variable and Fixed mortgages (the latter because of likely downward pressure on bond yields).
Need mortgage advise as rates change?
Our experienced mortgage brokers at Client First Mortgage Solutions, can help you navigate rate movements and choose the best mortgage strategy for your needs. Contact us to discuss your mortgage options.
