If you were hoping for a Bank of Canada rate cut in April, recent inflation numbers might complicate things.
Canada’s inflation rate jumped to 2.64% in February, up from 1.9% in January. While still within the BoC’s target range, it’s moving in the wrong direction for those hoping for lower rates soon. The central bank has been waiting for clear signs that inflation is cooling before making any cuts, and this latest data makes things more uncertain.
Why Does This Matter for Mortgage Rates?
The Bank of Canada sets its overnight rate based on inflation and economic conditions. If inflation remains stubborn, the BoC could delay rate cuts, meaning variable mortgage rates and HELOC rates may stay higher for longer.
What Are the Big Banks Predicting for 2025?
Looking ahead, expert opinions vary:
- Scotiabank expects the Bank of Canada to hold steady at the current rate through the end of 2025.
- BMO predicts one more 25-bps cut by year-end but warns that if the trade war escalates, the BoC may be forced to cut rates by another full percentage point.
- TD, RBC, and CIBC anticipate two more quarter-point cuts by the end of 2025, bringing the policy rate down to 2.25%.
This suggests mortgage rates could continue trending downward, making borrowing more affordable—but uncertainty around global trade policies adds a layer of unpredictability.
Adding to the Uncertainty: U.S. Tariffs
The U.S. is considering new tariffs on Chinese goods, which could disrupt global supply chains and keep prices elevated. If inflation stays high due to external factors like this, the BoC may hesitate to lower rates too soon.
What Should Homeowners and Buyers Do?
- If you’re in a variable-rate mortgage, you’re likely watching rate cut predictions closely. While a cut is still possible this year, the timeline may be shifting.
- If you’re considering locking in a fixed rate, keep an eye on bond yields—they influence fixed mortgage rates and have been moving in response to inflation data.
Good News for Fixed Rates This Week
Several lenders have recently reduced fixed rates, with the best 3 year fixed rate now starting at 3.79% for insured purchases/transfers, and the best 5 year fixed rate starting at 3.74%. We are consistently starting to see fixed rates in the 3.74-4.19% range for most cases, which are making fixed rates quite attractive.
Key Takeaways
✅ Inflation rose to 2.64% in February, making an April rate cut less certain.
✅ The Bank of Canada may wait longer before lowering rates.
✅ Fixed mortgage rates are influenced by bond yields, which react to inflation data.
✅ U.S. tariffs could push inflation higher, adding more uncertainty.
✅ If you’re in a variable rate mortgage, keep an eye on rate announcements!
Bottom line: The April rate decision just got more interesting. If inflation stays hot, the BoC might delay cuts, but if things cool down, we could still see some relief later in the year. Stay tuned!
