The first Bank of Canada rate announcement of 2025 gives us a 0.25% cut to the central bank rate bringing it to 3.00%. Most mortgage lenders will now have a Prime lending rate of 5.2%. This is a full 2% decrease since the central bank started cutting in June 2024. It is important to note that while we see 3.00% in the news, we generally have to add 2.2% and that’s the Prime lending rate that affects Variable rate mortgages.
For Adjustable Rate Mortgages (ARM), for every $100,000 owed, our payments decrease by approximately $13/month. Since June, we have seen the equivalent of eight (8) cuts of 0.25%. For a $500K mortgage, this translates into savings of approximately $520/mo. This is significant not only for those of us currently in an ARM or HELOC, but it also helps with qualification for new mortgages. Contact me if you have any questions about this.
It’s important to note that depending on when your next mortgage payment is scheduled for, you might not see this payment decrease until well into January. Don’t fear though, the savings in interest will be applied to your principal until your payments are adjusted.
What does this mean for you?
- Adjustable rate mortgage holders: You’ll see a slight drop in your mortgage payments, giving you extra cash flow every month. (see above)
- First-time buyers: Lower rates mean increased borrowing power, making it a great time to find your dream home.
- Upcoming renewals: If your mortgage renewal is on the horizon, this lower rate could work in your favor and ease your financial planning.
- Possible interest savings strategies: If you are in a fixed rate mortgage over 5%, there could be an opportunity to make adjustments to your mortgage and save you money.
- Fixed Rate: BoC announcements do not directly impact changes to Fixed mortgage rates. These are influenced by the 5-year Canada Bond Yield pricing, which has been up and down over the past few months.
No matter your situation, this is positive news for Canadians nationwide. If you have any questions about how this rate change impacts your mortgage or plans, don’t hesitate to reach out—I’m here to help!
Trump Tarrif Threat
This is causing a lot of economic uncertainty. If tarrifs are invoked on February 1st, does this mean Bank of Canada rate cuts will pause? Not necessarily – rate decreases are designed to stimulate the economy. However, this could be inflationary, so there is a lot at play. We will be watching closely.
How Low Will the Bank of Canada Go?
The next Bank of Canada rate announcement is scheduled for March 12th and I’ve attached the 2025 schedule for you here. Follow me on FB, IG and LinkedIn for ongoing updates and tips at @jennlockemortgages.
As always, if you have any questions about how this affect you or anyone you know, please contact me and/or share my information. I’m always happy to have a chat and help in any way I can.
