Rate Decision Summary
On July 30, 2025, the Bank of Canada held its overnight rate at 2.75% (with the Bank Rate at 3.00% and deposit rate at 2.70%). This is the third consecutive time the Bank has opted to hold rates steady. The decision reflects caution as policymakers wait for more clarity around U.S. trade policy and inflation trends.
Instead of its usual forecast, the Bank released a special edition of its Monetary Policy Report, featuring three economic scenarios due to ongoing trade uncertainty.
Why Buyers Should Care: Mortgage Rates and Housing Market Impacts
Variable-rate mortgages
For those with variable-rate mortgages, there will be no immediate change to payments or borrowing costs. This is because the prime rate remains anchored at 4.95%. While inflation is still above the 2% target, the Bank signaled that it’s open to cutting rates if economic growth slows and inflation continues to ease.
Fixed-rate mortgages
Fixed mortgage rates, which are influenced by bond yields, are also holding steady for now. However, with the five-year Government of Canada bond yield hovering above 3%, fixed mortgage rates remain in the 3.89% range and could edge higher if global trade tensions escalate.
Housing market dynamics
Across the country, homebuying activity has started to pick up. National sales were up by approximately 3.5% year-over-year in late June. This is largely due to improved affordability and buyer confidence following previous rate cuts. However, many buyers remain on the sidelines, watching to see where rates and the broader economy are headed. If uncertainty persists, it could spark more urgency among buyers looking to lock in current rates.
What Buyers Can Do Today
Get a rate hold or mortgage pre-approval. This is a smart move if you’re planning to buy within the next few months. It allows you to lock in today’s rate, protecting you if rates rise. Most pre-approvals are valid for up to 120 days.
Compare fixed and variable mortgage options. Variable rates currently offer payment stability, while fixed rates protect you from future increases. With fixed rates still under 4%, it may be wise to act soon if you’re leaning in that direction.
Take advantage of high savings rates. With the central rate on hold, guaranteed investment certificates (GICs) and high-interest savings accounts remain strong options for your down payment fund, offering returns around 5%.
Keep an eye on global trade developments. A key deadline in U.S. trade negotiations falls on August 1. The outcome could have ripple effects on inflation, currency values, and the future direction of Canadian interest rates.
Looking Ahead: Outlook for Rates and Economy
The Bank of Canada outlined three potential paths for the economy, depending on how trade conflicts unfold.
-
If current tariffs remain in place, economic growth will likely be slow. GDP could contract by around 1.5% before modestly rebounding by about 1%, with inflation staying close to 2%.
-
If trade tensions ease, stronger growth of around 2% could follow, with inflation remaining stable.
-
If tariffs escalate, the economy could face a deeper contraction. Inflation may temporarily spike above 2.5% before eventually returning to target levels.
Governor Tiff Macklem emphasized that the Bank’s next moves will depend on incoming data. If the economy weakens and inflation continues to moderate, rate cuts are possible later in the year.
Final Thoughts for Buyers
If you’re a current or future homebuyer, here’s what this rate decision means for you:
-
If you’re on a variable-rate mortgage, your monthly payments will remain the same for now.
-
If you’re shopping for a fixed-rate mortgage, it may be a good time to lock in. Rates are still competitive but could rise with more market volatility.
-
Consider getting a pre-approval to lock in today’s rates and give yourself more certainty while you shop.
-
If you’re still building your down payment, high-yield savings products remain a smart choice.
-
Stay informed about global economic developments, especially trade negotiations, as they can influence mortgage rates and home affordability in the months ahead.
