There could be good news on the horizon for Canadians, as the Bank of Canada is set to make an interest rate announcement this week.
In September, Canada’s central bank announced that it was lowering its lending rate by 0.25 points from 2.75 to 2.5 per cent. This came after three interest rate holds that began in April.
Now, experts say another interest rate cut could be on the way, with the Crown corporation set to make its announcement on Wednesday, Oct. 29.
Penelope Graham, mortgage expert at Ratehub.ca, said that Canada’s “sputtering economy” will likely compel the Bank of Canada to cut its benchmark rate once again by another 0.25 per cent.
“Business sentiment continues to be low, with the BoC’s latest survey indicating that firms don’t expect to hire next year, and that exports will continue to be squeezed by ongoing trade uncertainty,” she said.
But although Canada’s inflation rate increased in September, the prices that matter the most to BoC haven’t really increased. Graham explained that the headline number increased because gas prices were compared to last year’s unusually low prices, and not due to inflation.
And with mortgage interest rates still falling, another interest rate cut on Wednesday is likely.
“Whether or not the Bank will cut further in 2025 will depend on how the data and overall economic capacity develop,” said Graham. “If they choose to hold off on an October decrease to keep their powder dry, a December cut is all the more likely.”
How the Bank of Canada rate announcement could affect mortgages and housing
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Graham said that the Government of Canada’s five-year bond yield fell in the 2.5 per cent range — the lowest rate since Trump’s Liberation Day tariffs announcement in April caused global markets to crash.
Other factors could also contribute to favourable mortgage rates for Canadians.
“Expectations that the US government shutdown will resolve, and that the US Federal Reserve is also likely to cut rates, have brought the US 10-year treasury benchmark yield below four per cent, in turn pulling down Canadian yields — and setting the stage for lower fixed mortgage rates,” Graham explained.
It seems like the ideal time to consider a fixed mortgage rate, with lenders offering the lowest five-year fixed insured mortgage rate at 3.79 per cent. That rate is just nine points higher than the lowest variable-rate option.
If the BoC announces another rate cut, it could lead to more activity in the housing market, especially now that buyer confidence is returning as they wait for affordability to improve.
“Lower mortgage rates will incentivize pent-up demand to return to the market, should borrowers’ costs better align with budgets,” stated Graham.
So what does a rate cut mean for Canadians with variable rates?
According to Ratehub.ca’s mortgage payment calculator, a homeowner who put a 10 per cent down payment on a $676,154 home with a five-year variable rate of 3.79 per cent amortized over 25 years (total mortgage amount of $627,404) has a monthly mortgage payment of $3,229.
If the Bank of Canada announces a 25-basis point rate decrease, their variable mortgage rate will decrease to 3.54 per cent, and their monthly payment will decrease to $3,146. This means that the homeowner will pay $83 less per month or $996 less per year on their mortgage payments.
Robert Saunders, CEO of Ownright, a digital real estate law platform, pointed out that Canadians are facing a weak job market and that most new construction is being driven by rentals rather than homeownership.
“That shows developers and households alike are waiting for stability, not just lower borrowing costs,” he said.
While a potential rate cut could create favourable conditions in some markets, it won’t be enough to make a blip in larger markets.
“A further rate cut could help sustain momentum in markets like Montreal and Ottawa, where activity is already recovering, but in larger centres like Toronto and Vancouver, it’s unlikely to move the needle until confidence in employment and financing returns,” said Saunders.
As for interest rates in 2026, Graham said, “the outlook is less certain” due to the trade scenario that could affect inflation. In fact, it’s possible that Canadians could be looking at higher interest rates in the second half of next year.
The Bank of Canada will announce its decision on Wednesday at 9:45 a.m. ET (6:45 a.m. PT). The next scheduled rate update is on Dec. 10. You can follow BoC’s X account or subscribe to email alerts for the latest updates.
With files from Isabelle Docto