November 1, 2025

The Policy Move

After lowering its overnight rate by 25 basis points to 2.25 % on October 29, 2025, the Bank of Canada (BoC) made it clear it believes borrowing costs are now roughly where they need to be.

Governor Tiff Macklem said in Ottawa, “The policy rate is about the right level given the progress on inflation and the softening in growth.”
That statement immediately caught the market’s attention — not because of the rate cut itself, but because it hinted the central bank is ready to pause after months of incremental easing.

Why the Bank Cut but Cautioned

The decision followed a mixed macro picture:

Inflation slowed to 2.4 % year-over-year in September (its lowest since 2021).
GDP growth hovered near 0.7 % annualized in H2 2025, with manufacturing and exports still under pressure.
Unemployment rose slightly to 6.2 %, suggesting weaker hiring momentum.

BoC policymakers therefore delivered a “balancing act” — small enough easing to prevent an economic stall, yet cautious enough to keep inflation anchored around the 2 % target.

What It Means for Mortgages

For mortgage borrowers, this tone shift matters as much as the rate itself.

Variable-rate holders are already benefiting from the prime-rate reduction to 4.45 %, which major banks implemented within 24 hours.
Fixed-rate borrowers, however, should note that bond yields rose slightly after the BoC’s statement, as markets interpreted it as a near-term pause rather than a dovish pivot.
Renewals due in late 2025 and 2026 may still occur in a “mid-3 % to high-3 %” environment — historically moderate, but not cheap by pandemic standards.

Indicator	Latest (Oct 2025)	Trend
BoC Overnight Rate	2.25 %	▼ 0.25 %
Prime Rate (Big Six Banks)	4.45 %	▼ 0.25 %
5-Year Fixed Mortgage Avg.	3.75 % – 3.95 %	≈ Flat to ↑ Slightly

The Bigger Picture

The BoC’s October Monetary Policy Report described inflation as “easing but still sticky in shelter and services.” Housing remains the single largest driver of residual inflation, with rent and mortgage-interest costs up more than 6 % year-over-year.

That means the central bank must tread carefully: cutting too far could reignite price growth in the very sector it’s trying to stabilize.

Economists now expect the next possible move to come no earlier than March 2026, depending on wage growth and global energy prices.

Expert View

Mortgage broker Samantha Brooks of Toronto says, “This pause signal gives borrowers a planning horizon. You can model your payments for at least six months without worrying about sudden surprises.”

Meanwhile, analysts at RBC Economics interpret the “right-level” phrasing as a deliberate cue: the BoC is done for now but not ready to declare victory.
Bond traders echoed that sentiment; five-year yields nudged up 10 basis points within hours of the press conference.

What Borrowers Can Do Now

Variable-rate holders: Enjoy the 0.25 % relief, but don’t expect another cut soon. Consider applying extra savings toward your principal.
Fixed-rate shoppers: Rates are still historically reasonable; lock short-to-mid terms if you value stability.
Renewing in 2026: Start conversations early — lenders are quietly adjusting stress-test thresholds as inflation cools.
Investors: Expect softer cap rates and tighter margins; cheap money is not coming back quickly.

Bottom Line

The Bank of Canada’s latest move marks a turning point from active cutting to cautious observation. Borrowers finally have breathing space, but the message is clear: the era of automatic rate relief may be ending.

For homeowners, this is a moment to stabilize, budget, and plan strategically — not to assume that another wave of cheaper debt is around the corner.