The Bank of Canada (BoC) lowered its overnight lending rate by 25 basis points to 2.25% on October 29, 2025. This is the second consecutive cut, and it has prompted a decrease in Canada's prime rate to 4.45%, leading to lower borrowing costs for variable-rate mortgages and other prime-linked products. While fixed rates are not expected to drop further because they are influenced by bond markets that had already priced in the cut, further rate cuts are unlikely in the near future as the BoC indicated it will hold rates steady for the coming months.
Impact of the rate drop
Variable-rate loans: The prime rate has dropped to 4.45%, which reduces borrowing costs for variable-rate mortgages, home equity lines of credit (HELOCs), and other prime-linked loans. For example, the lowest five-year variable rate could drop, potentially saving around $83 per month on an average mortgage.
Fixed-rate loans: Fixed mortgage rates have largely stayed the same because bond markets had already anticipated this rate cut. The lowest five-year fixed insured mortgage rate is currently 3.79%.
Savings: Investors and savers will likely see weaker returns, as deposit rates and GIC yields are softening.
What to expect next
The Bank of Canada has indicated it will likely hold its policy rate at 2.25% for the next few months.
While some forecasts predicted further drops to 2.0% by the end of 2025 or early 2026, the BoC's signal for a hold makes further cuts in the immediate future unlikely.
Factors like a slowing job market, sluggish economic growth, and trade-related uncertainty influenced the decision to cut rates.
#AISummary of the drop of 25 basis points by the Bank of Canada #BoC.
Usable text in the #ALT, or directly import the image into something like #NotebookLM for OCR and further us
Bank of Canada
Press Release Details
www.bankofcanada.ca/2025/10/fad-...
#CBCNews
www.cbc.ca/news/busines...