Bank of Canada cuts interest rates by another 25 basis points

January 29th, 2025

 The Bank of Canada announced a further 0.25% rate reduction today. This brings the prime lending rate in Canada to 5.2%. Variable rate mortgage holders will see this reduction to their interest rate immediately. There has been a lot of talk about where fixed rates are headed in Canada relative to the uncertainty regarding President Donald Trump’s proposed tariffs. The following is a summary of the current and potential impact on interest rates in Canada.

1.     Proposed U.S. Tariffs:

 U.S. President Donald Trump has announced plans for 25% tariffs on Canadian goods, set to take effect on February 1, 2025. These measures are raising concerns about economic stability and trade relations.

2.     Bond Market Reaction:

 Canadian five-year bond yields, which directly influence fixed mortgage rates, have declined significantly in the past two weeks. Yields dropped from approximately 3.29% to just above 2.9%, signaling market uncertainty. (note that these are bond yields and not mortgage rates, however banks and other lenders set their fixed interest rates at a certain spread over bond yields. As such, we can tell what direction fixed rates are headed by monitoring bond yields.)

3.     Mortgage Rate Implications:

 Fixed mortgage rates could decrease if bond yields remain low. However, market volatility remains high, so rates could shift depending on how the tariff situation evolves.

Please feel free to forward or share of this information with any of your clients who may be interested. If you have further questions about how these developments might affect your client mortgage or financial goals, please don’t hesitate to reach out.

Questions?

Rob Cagnin - Mortgage Broker

rob@robcagnin.ca, 905-634-6111x113

Zack Kern - Mortgage Agent

zack@robcagin.ca, 905-634-6111x115

Indi Mortgage

184 Plains Road East, Burlington ON

L7T 2C3

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