The Bank of Canada has cut its key interest rate by 25 basis points today, bringing it down to 2.5%. For first-time home buyers in Ottawa and across Ontario, this move could make entering the housing market slightly more affordable, especially for those considering a variable-rate mortgage.

Why the Bank of Canada Made the Cut

The decision comes as the Canadian economy faces several challenges:

• Canada’s GDP contracted in the second quarter, largely due to trade uncertainty and tariffs, with exports falling by 27%.
  
• The unemployment rate climbed to 7.1% in August, reflecting over 100,000 jobs lost in recent months.
  
• Inflation pressures have eased, with August CPI coming in below the 2% target. The recent removal of retaliatory tariffs on U.S. goods also reduces future upward pressure on prices.

Governor Tiff Macklem noted that the governing council reached a “clear consensus” on the rate cut, aiming to balance risks while supporting economic growth.

What This Means for Ottawa Buyers

For Ottawa home buyers, the rate cut could translate into:

• Lower borrowing costs: A reduced policy rate can lead to more favourable variable mortgage rates, lowering monthly payments.
  
• Increased purchasing power: Slightly lower rates may allow buyers to qualify for larger mortgages, opening up more options in Ottawa’s housing market.
  
• Relief in a tight market: Housing supply remains constrained across the region, keeping prices high. Lower rates can help ease some affordability pressures.

The Bond Market and Fixed Interest Rates

While the Bank of Canada’s cut primarily affects variable mortgage rates, fixed rates are more closely tied to government bond yields. As of this morning, the Canada 5-year bond yield sits at 2.706%, little changed on the day. This suggests markets are holding steady, awaiting the U.S. Federal Reserve’s announcement at 2 p.m. EST.

For Ottawa buyers considering a fixed-rate mortgage, today’s cut is positive news, but fixed rates may not move significantly until broader North American monetary policy takes shape.

Proceeding Carefully

Although this cut is welcome, the Bank of Canada emphasizes moving “carefully” with future changes. Policymakers remain cautious about inflation and global trade uncertainty.

For first-time buyers in Ottawa, now is a good time to explore your options while planning strategically. Variable rates may not drop significantly beyond this point, and housing supply challenges remain.

How a Mortgage Broker Can Help

Navigating these changes can feel overwhelming, especially for first-time buyers. As a local mortgage broker, I can:

• Compare rates across multiple lenders
  
• Help you understand your borrowing power
  
• Structure a mortgage that fits your budget and long-term goals

With rates trending lower, now is an ideal time to connect. I can guide you through your options in Ottawa’s competitive housing market.