The Bank of Canada has lowered its overnight rate again to three per cent, marking a sixth consecutive decrease and good news for homebuyers and homeowners.
On Wednesday, the central bank announced it was dropping the rate by 25 basis points, , along with reducing the bank rate to 3.25 per cent and the deposit rate to 2.95 per cent.
“The cumulative reduction in the policy rate since last June is substantial. Lower interest rates are boosting household spending and, in the outlook published today, the economy is expected to strengthen gradually and inflation to stay close to target,” the bank said in a news release on Wednesday.
Bank of Canada reduces policy rate by 25 basis points to 3%, announces end of quantitative tighteninghttps://t.co/5mj02qT1AO#economy #cdnecon
— Bank of Canada (@bankofcanada) January 29, 2025
The latest changes are due to an ongoing period of “more-than-usual uncertainty,” the bank said in a press release, mostly caused by the threat of trade tariffs by the new U.S. administration. Others also suggest that the upcoming federal election and provincial election in Ontario may also be factors.
The central bank adds that it will be following the tariff threat closely because if they’re implemented “the resilience of Canada’s economy would be tested.”
“We will be following developments closely and assessing the implications for economic activity, inflation and monetary policy in Canada. The Bank is committed to maintaining price stability for Canadians,” it added.
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While a rate cut such as this often encourages borrowing and can boost housing market activity, experts warn that the rapidly evolving policy landscape today is far more complex than typical.
HOW WILL THIS RATE CUT IMPACT THE HOUSING MARKET?
According to Leah Zlatkin, a licensed mortgage broker and LowestRates.ca expert, the shift in borrowing costs offers a unique window of opportunity for prospective homebuyers, particularly those looking in big markets like Toronto and Vancouver.
“Many potential buyers are hitting the pause button, hoping for more favourable conditions later on,” she noted in a press release.
“While it’s not a full-blown buyer’s market across the board, and desirable properties in prime locations still attract competition, buyers undoubtedly have more leverage now than they’ve had in years.”
RATESDOTCA also explains that for every 25 basis-point drop, homeowners with adjustable variable rate mortgages will see a decrease of approximately $15 per $100,000 of mortgage in monthly payments.
“Each successive rate decrease is good news for homeowners and those renewing mortgages,” Victor Tran, a mortgage and real estate expert at the agency, said in a press release.
“While the housing market is showing some signs of life, it’s far from the rush predicted when rates began to decrease. Housing sales activity is slowly ticking up, but there is plenty of room for growth in activity. Buyers are currently well-positioned to take the time they need to find the right home and can make offers conditional on financing and inspections. While variable rates have decreased with each successive overnight rate decrease, there have not been significant changes to fixed rate offerings.”
