As 2025 kicks off, Canadians are closely watching the Bank of Canada (BoC) for its first interest rate update of the year. This is a crucial moment for homeowners, prospective buyers, and the broader economy, as the central bank’s decisions can significantly impact everything from mortgage rates to consumer spending.
Recap of the Last Rate Cut in 2024
The last significant rate change occurred on December 11, 2024, when the BoC lowered its key interest rate from 3.75% to 3.25%. This move came after experts had initially anticipated a 0.25% cut. However, these expectations shifted due to a rise in Canada’s unemployment rate, which reached 6.8% — the highest it had been in nearly eight years (excluding the pandemic years of 2020 and 2021).
What’s Next for Canadians: The January 29 BoC Announcement
The next update is scheduled for January 29, 2025. This announcement will not only include a rate update, but also a monetary policy report and commentary from the Bank of Canada. According to Penelope Graham, a mortgage expert at Ratehub.ca, 2025 is shaping up to be another unpredictable year for the Canadian economy.
In an earlier prediction, Graham warned that 2025 would be “another wild economic ride,” pointing to potential geopolitical factors such as a second term for U.S. President Donald Trump and a possible trade war. The uncertain environment, Graham noted, could have significant implications for Canada’s central bank and its decisions regarding interest rates.
What Could the January Rate Announcement Hold?
With the most recent Consumer Price Index (CPI) showing inflation slowing to 1.8%, many are speculating about the potential for another rate cut in the January 29 announcement. Despite prior indications that the BoC would slow the pace and size of rate cuts, Graham suggests that a quarter-point cut is still possible.
“Given the ongoing tariff uncertainty and the latest inflation data, I believe the BoC may opt for another quarter-point cut,” she says. “The central bank will likely be aiming to build a buffer against potential economic shocks while keeping the economy stimulated in the face of recession risks.”
The Bank of Canada typically alternates between straightforward interest rate updates and more detailed announcements that include monetary policy reports and commentary. The January 29 update will be a detailed one, offering more insight into the central bank’s outlook.
The Impact of Tariff Uncertainty and Bond Market Volatility
One of the key factors influencing the BoC’s decisions is the potential for new tariffs on Canadian products. U.S. President Donald Trump has threatened to impose these tariffs starting in February, which has led to increased volatility in the Canadian bond market. This uncertainty has caused the Canadian five-year yield to fluctuate significantly, which could have a direct impact on fixed mortgage rates.
“The bond market has been volatile, swinging from a high of 3.31% in November 2024 to 2.97% recently. This could put downward pressure on fixed mortgage rates,” explains Graham. However, with market sentiment changing rapidly, it remains unclear which direction rates will move in the coming weeks.
For Canadians shopping for a mortgage, whether for a new purchase or a renewal, Graham recommends securing a pre-approval and locking in a rate hold to ensure access to the lowest possible rates, especially if fixed rates rise or variable spreads shrink in the near future.
How a Rate Cut Could Affect Your Mortgage Payments
To illustrate the potential impact of a rate cut, let’s consider a hypothetical example using Ratehub.ca’s mortgage payment calculator.
Suppose Maha is a homeowner who purchased a $676,640 home with a 10% down payment. She has a five-year variable mortgage rate of 4.45%, amortized over 25 years. Her total mortgage balance is $627,854, and her monthly mortgage payment is $3,458.
If the BoC announces a 0.25% rate cut, her mortgage rate would decrease to 4.20%, lowering her monthly payment to $3,371. That’s a savings of $87 per month, or $1,044 annually.
Stay Updated on BoC Announcements in 2025
For those eager to stay informed about interest rate changes and monetary policy updates, here are the key dates for BoC announcements in 2025:
- Wednesday, January 29, 2025 – Rate update, monetary policy report, and commentary
- Wednesday, March 12, 2025 – Rate update only
- Wednesday, April 16, 2025 – Rate update, monetary policy report, and commentary
- Wednesday, June 4, 2025 – Rate update only
- Wednesday, July 30, 2025 – Rate update, monetary policy report, and commentary
- Wednesday, September 17, 2025 – Rate update only
- Wednesday, October 29, 2025 – Rate update, monetary policy report, and commentary
- Wednesday, December 10, 2025 – Rate update only
All announcements are typically released at 9:45 a.m., and Canadians can also subscribe to email updates to stay in the loop.
Staying Updated on Bank of Canada Interest Rate Changes in 2025
What Economists Predict for the Bank of Canada in 2025
2025 Rate Cuts: What’s Next for the Bank of Canada and the Economy
Bank of Canada Announces Another Rate Cut and Updates Mortgage Rules
Final Thoughts
With so much uncertainty in both the global and Canadian economies, the Bank of Canada’s decisions will continue to have significant implications for mortgage holders and the housing market in general. Whether it’s navigating interest rate changes, securing the best mortgage terms, or staying informed about global economic shifts, it’s essential to stay up-to-date with the latest announcements and expert insights.
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