The Bank of Canada has officially reduced its key interest rate by 0.25%. This decision provides immediate relief for variable-rate mortgage holders in Ottawa and across Ontario. However, uncertainty around U.S. tariffs and other economic risks could influence mortgage rates in the months ahead.

Immediate Impact for Variable-Rate Borrowers

Lowering the overnight rate typically leads to a drop in the prime lending rate, directly benefiting those with variable-rate mortgages or home equity lines of credit (HELOCs).

• On a $100,000 mortgage, monthly payments could decrease by roughly $14.
  
• For a $400,000 mortgage, that’s about $60 per month, or $720 per year in savings.

This is part of a series of rate cuts since June 2024, aimed at easing financial pressure for homeowners.

Fixed-Rate Mortgages Are Less Affected

Fixed mortgage rates are not directly tied to the Bank of Canada’s policy rate. They are influenced by bond yields, which have remained relatively stable. Still, economic developments—especially outside Canada—could push fixed rates higher in the coming months.

Economic Uncertainty: U.S. Tariffs and Global Risks

While today’s rate cut is good news for borrowers, several uncertainties remain:

• The new U.S. administration has proposed 25% tariffs on certain imports, including Canadian goods.
  
• Higher costs for U.S. businesses could lead to inflationary pressure, which may influence the Federal Reserve’s rate decisions.
  
• Increased U.S. inflation typically pushes bond yields higher, which can cause Canadian fixed mortgage rates to rise.

For Ottawa and Ontario homeowners, this means that despite the Bank of Canada’s cut, fixed mortgage rates may remain elevated if global inflationary pressures continue.

Looking Ahead: March 12 Rate Announcement

The next Bank of Canada rate decision is scheduled for March 12, 2025. Key factors to watch include:

• Whether Canadian inflation remains stable, allowing for potential further cuts.
  
• The likelihood of U.S. tariffs and their effect on the Canadian economy.
  
• Movements in Canadian bond yields in response to global economic trends.

What This Means for You

If you’re considering buying, refinancing, or renewing a mortgage in Ottawa or elsewhere in Ontario, now is a good time to review your options. Variable-rate borrowers may see immediate savings, while fixed-rate borrowers should monitor global economic trends to make informed decisions.

For guidance tailored to your specific situation, including pre-approvals, refinancing, or mortgage planning, reach out to a local mortgage professional today. We can help you navigate these changes and plan your next steps confidently.