Bank of Canada Interest Rate Update - March 2025
Well, it has been quite the rollercoaster ride these last two months, and honestly, there’s still a lot of uncertainty ahead. But don’t worry, I’ve got you covered! Below are the latest updates, along with a few predictions about what’s coming down the road. (Spoiler alert: it’s unpredictable!)
Recent Changes (Or, “What’s Been Happening While We’ve All Been Trying to Keep Up”)
March 12th: The Bank of Canada (BoC) dropped interest rates by 0.25%. If you’re in a variable-rate mortgage, congratulations! You’re finally getting some relief—rates have dropped 2.25% since June 2024.
For the full BoC announcement, click HERE
Key Economic Events (A.k.a. “Trump, Tariffs, and What’s Going On?”)
January 29: BoC reduced rates by 0.25%.
February 1: Trump announced 25% tariffs on almost all exports from Canada.
February 2: Canada retaliated with its own tariffs.
February 3: Trump delayed tariffs for 30 days. (Phew… but not for long!)
February 13: Trump added more tariffs on steel and aluminum—bringing the total to 50% to begin March 12
March 4: Trump decided, “Yep, tariffs are happening.”
March 5: Trump gave some automakers a pass (Ford, GM) until April 2nd.
March 6: Trump signed amendments to allow tariff exemptions on some goods.
March 7: New tariffs on dairy and lumber exports were announced.
March 10: Ontario announces a 25% tax on electricity to U.S. households.
March 11: Ontario decided to pause that tax for now. (Talk about mixed signals!)
March 12: The BoC drops rates again by 0.25%
March 12: Trump’s steel and aluminum tariffs finally kicked in.. although only at 25%, as Trump (once again) changed his mind.
March 12: Canada announced counter-tariffs on $30 billion worth of US goods imported to Canada—starting March 13th. (Oh boy, here we go again…)
March 26: Trump announces a 25% tariff on automobile imports to begin Apr 3rd... (this is concerning for Canada's auto sector.)
It’s a bit of a hot mess right now, isn’t it? And as you can see, things are unpredictable—so buckle up!
What Happens to Interest Rates? (Because, Really, This Is All We Care About)
So, here’s the million-dollar question: What’s going to happen to interest rates? Well, honestly, it’s anyone’s guess. The future is as clear as a foggy morning right now. But here are a couple of possibilities:
Current Tariffs Continue As Planned: A recession might hit both Canada and the U.S., and rates could drop further than expected (for a little while). However, the increased cost of goods due to tariffs and supply chain disruptions, along with increased Government spending and recent policy announcements could reignite inflation driving fixed rates up again, with variable rate potentially following suit if inflation ticks higher than the BoC's comfort level (neutral range). The worst case scenario could cause Stagflation, more on this below.
Tariffs Get Reduced, But Continue: Some goods would still get more expensive, supply chains may still be disrupted, Government spending is still an issue, all of which could spark reinflation—in this scenario the BoC may still drop rates another 0.50% as expected, but then hold off on any future rate changes to see what happens, however fixed rates could still rise due to inflation concerns.
There is a sudden end to all tariffs: (although a very unlikely scenario) Fixed rates may rise quickly! and the BoC would likely pause all interest rate changes for now to see how things play out with our domestic economy.
"Stagflation"—a period of high inflation coupled with low economic growth. Tariffs tend to raise prices, while economic growth slows due to disruptions in trade and business investment. This could threaten jobs and businesses in Canada, leading to a weakened economy, but one with higher rates. This is not a position we want to be in.
Although rates may drop in the near term due to a weakening economy on both sides of the border, fixed rates are still expected to rise over the next 2-3 years, especially if inflation kicks back in. So, if you're taking a variable rate and trying to time the market, good luck! (And, if you figure it out, please let me know the secret.). For a risk averse borrower a fixed rate mortgage today may be the safest play.
What Should You Do Now?
If you have a variable-rate mortgage and all the uncertainty is giving you a headache: it might be time to lock in a fixed rate for some peace of mind. We aren't expecting fixed rates to drop tremendously lower than where they are today (But I am still searching for that darn crystal ball). If you plan to lock in, let's chat about your future plans to help you make the best decision for your situation.
If you are comfortable with the potential risks, and see rates dropping in the near future: If you don’t mind some ups and downs and your budget can handle it, a variable rate might be your best bet. Based on the predictions, variable rates may outperform fixed over your term.
If your mortgage is renewing in the next 2-3 years: It could be worth renewing early to avoid potentially higher rates in the future.
If you are currently house hunting or have a renewal coming up: Lock in a rate now! (most lenders will hold rates for 120 days, so you are protected while we see how this all unfolds).
Could Rates Go Lower or Higher?
Yes, both could happen. (You’re welcome for the clarity, right?) The uncertainty is unlike anything we’ve seen, so your decision should be based on your comfort level and financial situation.
My Advice:
Get your financial house in order now. If you’ve got high-interest debt or are struggling with payments, let’s talk about renegotiating your mortgage for a lower rate. This could really help you save money—like, tens of thousands of dollars kind of savings. And always consult a mortgage professional before making any big financial decisions.
What Does This Rate Announcement Mean for You?
Variable-rate mortgage holders: Your payment should drop by about $20 for every $100,000 in mortgage debt, depending on your rate and other factors.
Fixed-rate mortgage holders: No changes.
Fixed-payment, variable-interest mortgages: Your payment stays the same, but hey—less interest is a win!
Should You Lock-In Your Rate?
If you're thinking about locking in, now might be the right time. Here are some of our lowest fixed-rate options:
1 year @ 4.69%
2 years @ 4.09%
3 years @ 3.99%
4 years @ 4.19%
5 years @ 3.99%
**Conditions apply.
What Am I Doing?
I am staying variable in all 3 of my mortgages. I hoped rates would go lower than they have to warrant a lock in for me, but the way things stand today I am going to ride this one out and see where things go. I may lock in one of my properties to balance out the risk, I'll keep you posted on that. Once again, I have a high risk tolerance and my budget can support (and already has...sigh) the potential for higher rates.
What Should You Do Next?
If you’re ready to lock in, contact your lender for rate options. Then send me the details, and I’ll help you strategize the best approach. As always, our team is here to help, so don’t hesitate to reach out if you have questions. Let’s navigate this crazy ride together!
Next BoC announcement date is April 16th, stay tuned for our next update then!
