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:

Upsizing or Downsizing? Here’s What You Should Know Right Now

Whether you're moving into a larger home to accommodate your growing family or looking to simplify life with a smaller, more manageable space, today’s interest rate environment offers both opportunities and important considerations.

With the Bank of Canada holding its key rate at 2.75%, and fixed mortgage rates now sitting below 4%, buyers benefit from significantly improved borrowing conditions compared to just a year ago. At the same time, Canada’s housing market is shifting, with prices stabilizing or slightly declining in many regions. This makes it a more flexible environment for those looking to make a lifestyle change — either scaling up or simplifying.

What’s Driving This Opportunity

• Borrowing costs are significantly lower than in 2023, when mortgage rates neared 6–7%. This means more manageable monthly payments, even when purchasing a larger property.
• Housing supply is growing, and market activity has slowed, giving buyers more room to negotiate, longer time to make decisions, and better terms overall.
• Home prices are softening slightly nationwide — with forecasts calling for a 3–4% drop in 2025 on average, and up to 5–6% in certain urban centres like Toronto and Vancouver.

While this market favors buyers, economic uncertainty remains. Slower GDP growth, a cooling job market, and global trade tensions all introduce potential volatility. That’s why it’s important to structure your financing thoughtfully and plan for multiple future scenarios — especially if you're relying on equity from a sale.

Considerations for Upsizing

• Use lower rates to stretch your buying power, but be mindful of future rate movements. Even with a larger mortgage, locking in a low fixed rate now may offer long-term stability.
• Factor in future expenses like higher utilities, maintenance, and property taxes that often come with a larger home.
• Make use of equity smartly — if you're selling your current home, consider how much to reinvest and how much to keep as a buffer.

Considerations for Downsizing

• Focus on lifestyle goals and long-term costs — downsizing can reduce financial stress, but it’s still important to understand how much equity you’ll retain after the move.
• Explore mortgage-free options — in some cases, proceeds from a sale can fully cover your next home, freeing up monthly cash flow.
• Consider condo or townhome fees if moving into managed communities — those extra costs can add up and should be part of your total affordability picture.

Whether you’re moving up or moving on, the current market gives you space to do so strategically — with better rates, more selection, and greater negotiating power than in recent years. But with an uncertain economy, careful planning is key to turning your next move into a smart long-term decision.