Mortgages

By Penelope Graham on March 12, 2025
Estimated reading time: 7 minutes

Created By

Ratehub.ca

By Penelope Graham on March 12, 2025
Estimated reading time: 7 minutes

How the BoC’s seventh consecutive rate cut will impact Canadians, and what to know whether you’re a borrower, investor or saver.

Today marks the seventh cut in a row for Canada’s benchmark borrowing rate, as our central bank does what it can to pad against tariff threats and possible recession.

The Bank of Canada (BoC) lowered its overnight lending rate—which lenders use to set their prime rates, and, by extension, variable mortgage rates—by another quarter of a percentage, bringing it to 2.75%. This rate now sits a full 225 basis points lower than when the BoC first kicked off its rate cutting cycle inJune 2024. As a result, the prime rate at most Canadian lenders will lower to 4.95%.

The main impetus behind today’s rate cut is the economic fallout from U.S. tariff threats, which have been ongoing—and rapidly evolving—since the start of the year. After initially vowing to implement blanket 25% tariffs on all Canadian imports to the States, with a 10% tariff on energy, on February 4, U.S. President Donald Trump delayed their implementation to March 4, and again to an even later April 2 deadline. (Read my take on how 25% U.S. tariffs could impact Canadian mortgage rates.)

However, while not currently in force, the tariffs have already caused cracks in the Canadian economy, preventing businesses from investing and hiring, and dampening consumer spending. That was enough to pass on this most recent rate cut, stated the BoC, despite other economic data that shows strengthening GDP and inflation.

“While economic growth has come in stronger than expected, the pervasive uncertainty created by continuously changing tariff policy is restraining consumers’ spending intentions and businesses’ plans to hire and invest. Against this background, and with inflation close to the 2% target, the Governing Council decided to reduce the policy rate by a further 25 basis points,” states the BoC’s release.

While the rate outlook remains extremely uncertain, it’s largely expected that the BoC will need to slash its benchmark a few more times, as long as tariffs persist. However, that will put the central bank in the sticky spot of stimulating the economy while sacrificing progress on inflation, as tariffs and accommodative monetary policy push prices higher. (Remember the 10 rate hikes that occurred between March 2022 and July 2023?)

In a special edition publication today, the central bank breaks down how the economic........

© MoneySense