Bank of Canada Holds Rate at 2.75% – What It Means for You

On April 16, 2025, the Bank of Canada (BoC) held its benchmark interest rate at 2.75%, marking the first pause after seven consecutive cuts​. This decision comes as Canada faces a turbulent economic backdrop – an environment of slowing growth, persistent inflation pressures, and uncertainty over a U.S. trade war. Instead of a typical forecast, the BoC’s latest Monetary Policy Report outlined two potential scenarios for the economy, reflecting the unusual uncertainty:

• Scenario 1 – Tariffs Contained: Trade tensions remain high but tariffs are limited in scope, eventually being rolled back. Canada’s growth would slow only temporarily (GDP stalling in Q2) before resuming modest expansion, while inflation, after dipping to ~1.5% in the near term, would return to the 2% target​. In this cautious upside scenario, the economy avoids a major downturn and price growth stays manageable.
• Scenario 2 – Protracted Trade War: A long-lasting global trade war erupts, with U.S. tariffs sparking broader retaliation. In this case, Canada could enter a significant recession within the year, and inflation might spike well above target (peaking around 3.5% by mid-2026)​. The BoC warns this scenario could permanently reduce Canada’s economic potential and raise costs for consumers.

“These are only two of many possible outcomes,” Governor Tiff Macklem noted​, underscoring the high uncertainty. The Bank emphasized it will proceed carefully – being “less forward-looking than normal” and ready to “act decisively if incoming information” warrants​ – since no one can know for sure which scenario (or something in-between) will unfold.

What does this all mean for Canadian borrowers and homeowners? In short, interest rates are steady for now, staying at relatively low levels after the past year’s cuts. The prime rate at major banks sits around 4.95% (down from ~6.95% a year ago), translating into much lower variable mortgage rates and improved affordability for consumers​. However, the economic climate is uncertain: growth is slowing (the BoC expects near-zero GDP in Q2) and the job market has shown signs of strain​. Inflation has eased to around the 2% range recently​ – even dipping to 1.5% on some measures due to temporary factors​ – but core price pressures remain elevated (near 3%)​. And in a worst-case trade war scenario, inflation could jump higher even as growth stalls.

In the sections below, we break down how this rate hold and economic outlook impact you, based on your situation. Whether you’re preparing to buy your first home, renewing an existing mortgage, or refinancing your loan, you’ll find tailored insights and action steps. We’ll also point you to useful tools (like calculators and applications) to help you navigate your next move. Our goal is to help you make confident, informed decisions – even in an uncertain environment – with our trusted guidance. Let’s dive in:

For First-Time Homebuyers

If you’re a prospective first-time homebuyer, the current rate hold comes as cautious good news. Borrowing costs have stabilized at a lower level after last year’s rate cuts – the BoC’s overnight rate is down from a 5% high to 2.75% now, bringing typical 5-year fixed mortgage rates below ~4% at many lenders and variable rates around ~4.25%​. This means improved affordability on mortgages compared to 2023’s highs. In fact, the drop in rates has already started to reduce carrying costs: mortgage interest costs in the CPI (inflation basket) fell to 7.9% in March from 9.0% in Feb, thanks to earlier BoC cuts and cheaper fixed rates​. Lower rates can translate into lower monthly payments or a higher approved loan amount – a welcome relief for buyers chasing its first home.

Beyond rates, the housing market in 2025 has shifted to be a bit more buyer-friendly. Home prices are now projected to soften on average this year – TD Economics expects a 3.2% drop in 2025 nationally​ – as the market absorbs the impact of trade uncertainty, a cooling economy, and affordability challenges. After years of rapid growth, sales activity has pulled back and price gains have stalled, especially in Ontario and B.C. (which could see price declines of 4–6% in 2025)​. In many regions, conditions have shifted in favor of buyers with more supply and less competition, meaning you may face fewer bidding wars and even see some listing prices ease. For first-time buyers who felt squeezed out in the past, this combination of lower interest rates and moderating home prices opens a window of opportunity to enter the market on more reasonable terms.

However, a note of caution: the same economic uncertainty that’s tempering home prices could also affect your personal financial confidence. A protracted trade war or recession scenario would mean a weaker job market (TD warns of a “deteriorating jobs market” contributing to subdued housing demand​. Make sure to evaluate your job stability and budget under different conditions – it’s wise to “stress test” your mortgage affordability at a slightly higher rate, just in case things change. The good news is that inflation is currently under control and further rate hikes seem unlikely in the near term, but one day rates may rise as the economy normalizes. So, build in a buffer for the future.

Opportunities and Next Steps for Buyers:

• Get Pre-Approved and Lock In a Rate: It’s a great time to secure a mortgage pre-approval given today’s lower rates. A pre-approval will lock in a rate for up to 120 days, protecting you if conditions change. Start by checking your price range with our online Mortgage Affordability Calculator (part of our Mortgage Calculators suite) – this tool helps you estimate how much home you can afford based on your income, down payment, and the current rates. When you’re ready, you can apply online for pre-approval or contact our broker to guide you through it​.
• Leverage Buyer’s Market Conditions: With the market tilting toward buyers, you may have more negotiating power on price and conditions. Use this to your advantage – for example, you might include conditions for financing or inspection without as much risk of losing the deal. Research local market trends (we can help with data) to understand what a fair price is, and don’t rush into an overbid. If home prices are indeed trending downward slightly in your area​, you have reason to be patient and shop around.
• Consider a Rate Strategy (Fixed vs. Variable): Stable or falling rates can make variable-rate mortgages attractive (since the BoC is in a holding pattern and could even cut further if the mild scenario plays out). On the other hand, today’s fixed rates are relatively low and provide peace of mind for five years. Think about your risk tolerance: would you be comfortable if rates oscillate? If not, locking in a fixed rate now could secure affordable payments long term. Expert tip: Many first-timers choose a fixed rate for stability, but there is no one-size-fits-all – discuss the pros and cons with your broker.
• Optimize Your Down Payment and Budget: Use this period of rate stability to save up extra down payment if possible (which lowers your mortgage and can save you thousands in CMHC insurance if you can reach 20% down). Also, plan for closing costs and have an emergency fund. Buying your first home in an uncertain economy is doable with prudence – the key is to leave wiggle room in your budget.

By taking these steps, first-time buyers can turn the current market dynamics into an advantage. We offer tools and expert advice to guide you through each step – from our affordability and payment calculators to personalized support from our brokers. Feel free to reach out for a no-obligation consultation to discuss your home buying plans. We’re here to help you become a homeowner with confidence, even in uncertain times.