Montreal, September17 2025 – The Bank of Canada announced a 25 basis point cut to its key interest rate today, bringing it down to 2.50%.

This decision marks a turning point for monetary policy after several months of pause^[1].

For homebuyers, this cut means credit is a bit more affordable, especially for variable-rate mortgages. For owners and sellers, it could help keep up demand and stabilize prices in a market that had slowed down.

Economic factors behind the Bank of Canada’s decision

Economy: GDP declined by 1.5% in the second quarter of 2025, mainly due to a 27% drop in exports and a decline in investment.
Troubled labor market: The unemployment rate reached 7.1% in August, highlighting job losses in sectors related to international trade.
Inflation under control: Headline inflation reached 1.9% in August, below the 2% target, and inflationary pressures eased following the removal of retaliatory tariffs on certain U.S. imports.
Persistent trade tensions: Current trade tensions with the United States continue to affect business confidence and investment decisions.

Effect of the rate cut on mortgage interest rates

Variable mortgage rates are directly affected by the key interest rate cut. Banks and lenders will adjust their prime rates over the next few days, resulting in lower monthly payments for affected borrowers. This cut offers immediate relief to those who have chosen variable rate products or revolving lines of credit.

Fixed rates are mainly determined by bond yields and market expectations. As a result, a decision by the Bank of Canada does not often lead to an automatic adjustment of fixed rates.

In this context of anticipated declines, bond markets are expected to react by pushing fixed rates slightly lower.

What it means for active buyers in the market

The 25 basis point cut in the key interest rate is unlikely to cause a frenzy in the real estate market. The impact on payments and rates offered by banks will be modest.

However, we have already seen a downward trend in fixed mortgage rates over the past few weeks. In general, it is the accumulation of rate cuts that causes the market to surge.

Nevertheless, despite this more favorable environment, high prices and low property availability in many regions continue to limit opportunities for many buyers. A rigorous analysis of financial capacity remains essential.

Economic projections to follow

The Bank of Canada’s decision represents a significant change in Canadian monetary policy. While this offers a glimmer of hope for the real estate sector, there are many possible scenarios for what happens next, which will largely depend on the measures contained in the next federal budget, to be announced on November 4, 2025.

The evolution of economic indicators, particularly GDP and inflation, shows that a rate cut is still possible in October.

– – –

^{[1] Bank of Canada Lowers Policy Rate to 2.50%, Bank of Canada}