Earlier this month, the Bank of Canada announced its seventh consecutive interest rate cut since it began lowering rates in June 2024.

These rate cuts were widely expected as inflation continues to cool and economic growth shows signs of slowing.

While lower interest rates are welcome news for Canadians carrying mortgages and other debt, they present significant challenges for savers and retirees who rely on interest income.

The good news for borrowers is interest rate cuts are designed to stimulate economic activity by making borrowing cheaper and encouraging spending and investment. For Canadians with variable-rate mortgages, lines of credit or other forms of debt, lower rates mean reduced monthly payments and improved cash flow.

For example, a homeowner with a $500,000 variable-rate mortgage at five per cent interest would have been paying approximately $2,900 a month in principal and interest. If rates drop by one per cent, that monthly payment could decrease to around $2,650—a savings of $250 per month or $3,000 per year. These savings can provide much-needed relief for families feeling the pressure of high living costs and stagnant wage growth.

Lower rates also make it more affordable for prospective homebuyers to qualify for a mortgage, potentially giving the real estate market........

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