Mortgage Rate Forecasts: Getting Ready for the Bank of Canada’s Next Announcement

We hear about “rate hikes” and “rate cuts” all the time, but what does that really mean for your mortgage? With another Bank of Canada announcement coming up soon, it’s a good time to look at how these decisions could influence both variable and fixed rates.

The Bank of Canada’s Policy Rate

The Bank of Canada (BoC) sets a key interest rate that banks use as a starting point for their own lending rates. This policy rate is reviewed 8 times a year, and even a small change can have a noticeable effect on the cost of borrowing. When people talk about interest rates going up or down, they’re often referring to this BoC rate.

Variable vs. Fixed: What’s the Difference?

• Variable mortgages: The interest rate you pay can fluctuate over time, typically following changes in your lender’s prime rate. When the BoC lowers its policy rate, lenders reduce their prime rates, which will result in lower payments for variable‑rate borrowers. If the policy rate goes up, variable rates move up as well. Some lenders variable rate mortgages have fixed payments, so while the payment won't change, the amount going towards interest will.

• Fixed mortgages: Your rate is locked for a set term (for example, two, three or five years). Fixed rates tend to follow trends in the bond market rather than the BoC rate itself. Bond yields reflect broad economic expectations and can rise or fall based on factors like inflation and investor sentiment. Because of this, fixed rates might change even when the BoC policy rate stays the same.

What to Watch for in the Next Announcement

Economic forecasts vary widely. Some market observers anticipate modest rate reductions in the coming months, while others think the policy rate could hold steady. Tariffs, inflation trends and global economic conditions all play a part in the BoC’s decisions. Since there are so many moving parts, it’s a good idea to stay flexible and be prepared for different scenarios.

Tips for Homebuyers and Homeowners

• Gauge your comfort level: A variable rate might offer savings when rates fall, but it also means your payments can change. Fixed rates provide payment certainty for the length of the term, which can be helpful for budgeting.

• Consider term lengths: Shorter fixed terms can provide some flexibility. If rates decline, you’ll be able to renew sooner at a potentially lower rate.

• Get pre‑approved: A pre‑approval can secure a rate for a few months, giving you a cushion if rates rise while you’re house hunting.

• Reach out for guidance: Speaking with a mortgage broker can help you weigh your options. Brokers look at various lenders and products and can help find a fit based on your financial goals.

Final Thoughts

The next BoC announcement won’t affect everyone in the same way. Variable‑rate borrowers will see changes sooner than fixed‑rate borrowers, and even then, the exact impact depends on your specific mortgage terms. By understanding the basics and working with a professional, you can feel more confident about your mortgage decisions—no matter which way rates move.

Ready to explore your options or apply for a mortgage? Start your application or get in touch to discuss how the upcoming rate decision may affect you.