This morning, the Bank of Canada (BoC) announced it would keep its overnight lending rate unchanged at 2¾%. Many had anticipated a 25 basis point cut, which would have had a direct impact on mortgages across Ontario, including Ottawa.

Variable-Rate Mortgages

For existing homeowners in Ottawa and across Ontario with variable-rate mortgages, a rate cut would have been welcome news. Typically, lenders adjust their prime rates when the BoC changes its overnight rate. A 25 basis point reduction could have led to lower mortgage interest rates within days, translating to reduced monthly payments—helpful for those managing tight household budgets in today’s economic climate.

A potential cut would also make the market more accessible for new buyers in Ottawa, Toronto, and other Ontario cities where housing affordability remains a challenge. Lower borrowing costs could encourage buyers who have been waiting for a more favourable rate to enter the market. If you’re anticipating a cut, now is the time to prepare, as market experts still expect the BoC may adjust rates later in the year.

Fixed-Rate Mortgages

While fixed-rate mortgages aren’t directly tied to the BoC’s overnight rate, they are influenced by bond yields, which often respond in anticipation of central bank moves. A future rate cut could reduce bond yields, potentially lowering fixed mortgage rates. However, the extent of the effect depends on market expectations and broader economic factors.

Homeowners with fixed rates nearing renewal should pay attention. A large portion of Canadian mortgages—roughly 60%—are set to renew in 2025 or 2026. Many of these mortgages were initially secured when rates were historically low. Even if the BoC cuts rates next month, renewals may still occur at higher rates than originally locked in, resulting in increased monthly payments for some homeowners.

Strategic Steps for Mortgage Holders

• Review Your Mortgage Terms: Understand how any rate change could affect your specific mortgage type.
  
• Consult Mortgage Professionals: Work with a broker or financial advisor to explore refinancing or adjust your mortgage strategy.
  
• Monitor Market Trends: Stay informed on upcoming rate announcements (the next is July 30th) and economic shifts that could impact mortgage rates in Ontario.

Looking Ahead

The BoC emphasized its focus on maintaining Canadians’ confidence in price stability amid global uncertainty. For Ottawa and Ontario homeowners, the possibility of a rate cut next month presents an opportunity to reassess your mortgage strategy and potentially secure lower borrowing costs. Staying informed and planning strategically is key in this evolving market.

For tailored advice and guidance specific to Ottawa’s housing market, consulting with a local mortgage professional can help you make informed decisions and optimize your mortgage strategy.