Paul Garrett

Why the June Rate Hold Matters

On June 4 2025, the Bank of Canada (BoC) left its overnight rate unchanged at 2.75 % for the fourth meeting in a row (Source: Bank of Canada press release, June 4 2025). While the headline sounded uneventful, the ripple effects shape every mortgage conversation you'll have for the rest of the year, from first-time buyers wondering whether to go variable to renewal clients debating a three-year versus a five-year fix.

Variable-Rate Borrowers: Breathing Room but No Holiday

Because most Canadian variable-rate mortgages are priced "prime minus," a steady policy rate means prime (currently 4.95 %) stays put. Monthly payments on adjustable-payment variables remain the same, and static-payment variables avoid hitting a new trigger rate. Yet holding flat isn't the same as relief, amortizations are still stretched for thousands of borrowers who absorbed last year's hikes. If you're in that camp, use this pause to revisit a prepayment plan or consider converting to a shorter fixed term.

Fixed-Rate Outlook: Bond Yields Take Centre Stage

Five-year Government of Canada bond yields dipped below 3 % after the BoC announcement as traders priced in two potential cuts later this year. Lenders have already trimmed discounted five-year fixed rates by 10–15 bps since mid-May. The window could be brief: a stronger-than-expected GDP print or another bump in U.S. Treasury yields would push Canadian bonds higher, dragging fixed mortgage rates with them.

Stress-Test Implications

OSFI's mortgage stress test uses the greater of 5.25 % or the contract rate + 2 %. With deep-discounted five-year fixed deals now hovering around 4.54 %, many borrowers are still qualifying at 6.54 %, almost a full point lower than last autumn. That improved headroom can raise a household's maximum loan amount by roughly 7 %–8 %, making pre-approval timing a strategic lever for summer buyers.

Smart Moves for the Remainder of 2025

• Stagger terms: Blend a shorter three-year with a five-year to hedge both directions.
• Early renewal: Clients maturing in the next 12 months can lock today's fixed rates before fall volatility.
• Prepayment sweeps: Channel tax refunds and bonuses into principal while rates are stable.
• HELOC strategy: Combine a variable-rate HELOC for flexibility with a fixed-rate mortgage for certainty.
• Rate-float option: Some lenders now allow a one-time switch from fixed to variable without penalty, perfect if cuts arrive in Q4.

For brokers and agents, the advisory edge lies in scenario modelling: show clients how a single 25-bp BoC cut could shave $13–$15 off every $100,000 of variable balance, and contrast that with the cost of waiting if fixed rates bounce first. Tools like mortgage rate "trigger-point" alerts and automated renewal reminders keep you front-of-mind when the next policy move lands.

Bottom Line

A rate hold may sound like a non-event, but it's a strategic pause that savvy Canadians can leverage. Whether that means stress-test relief for new buyers or a stress-free renewal for existing homeowners, guidance from an informed mortgage professional makes all the difference.

Frequently Asked Questions

Q1. Does the June rate hold change the qualifying rate right away?
A1. Only indirectly. If your contract rate plus 2 % falls below 5.25 %, the stress-test floor stays 5.25 %. When discounted fixed rates drop enough, you'll qualify slightly easier.

Q2. Should I lock a fixed rate now or wait for possible cuts?
A2. If your closing is within 90 days, today's fixed rates look attractive versus early-2024 highs. You can also choose a lender that lets you "float down" if rates improve before funding.

Q3. Are HELOC rates frozen too?
A3. Yes. Most HELOCs are priced at prime plus a spread. With prime steady, your HELOC rate remains unchanged until the BoC moves again.

Q4. Could the Bank of Canada still cut rates later in 2025?
A4. According to BoC Governor Tiff Macklem, the Governing Council is "prepared to act" if unemployment softens and inflation trends toward 2 % (Macklem press conference, June 4 2025). Markets currently price a 60 % chance of a 25-bp cut by December.

Q5. How can a mortgage broker help me navigate this?
A5. Brokers compare dozens of lender promos daily, model rate scenarios, and negotiate rate-hold extensions, giving you clarity and potentially saving thousands over the life of your mortgage.

If you've been waiting for interest rates to drop before locking in a mortgage, you're not alone. On June 5, 2025, the Bank of Canada (BoC) decided to hold its overnight lending rate at 4.75%, marking the first pause in rate hikes in over two years. While many Canadians hoped this would mean significantly lower mortgage rates, the reality is a bit more complex.

What Does a Rate Pause Mean?

A "rate pause" means the Bank of Canada didn't increase or decrease its key interest rate this time around. It's a signal that inflation is starting to cool off just a bit, but not enough for them to start slashing rates just yet. That's important because this overnight rate influences how much lenders charge for variable-rate mortgages, lines of credit, and other loans.

So, Are Mortgage Rates Going Down?

Not necessarily. While a pause may lead to slightly lower fixed mortgage rates, especially if the bond market reacts positively, there's no guarantee we'll see a big drop right away. In fact, some lenders are still playing it cautiously because of ongoing concerns like:

• Sticky inflation, especially in food and housing
• Tariffs affecting supply chains and prices
• Global uncertainty that could impact our economy

Fixed vs. Variable: What Should You Do?

If you're in the market for a mortgage, now might be the time to compare fixed and variable options more closely.

Fixed-rate mortgages are typically tied to bond yields, which have started to ease. This could mean better deals are on the horizon, especially for shorter terms like 1–3 years.

Variable-rate mortgages are directly linked to the BoC's rate. Since there's no cut yet, your payments won't drop-though some economists are predicting a cut later in 2025.

???? Tip: If you're renewing your mortgage or looking to buy soon, consider a shorter fixed term. This lets you ride out today's rates while staying flexible for future drops.

Why This Isn't a "Go" Signal...Yet

Although this pause is encouraging, the Bank has made it clear that it is still watching the economy closely. If inflation flares up again, they could hold or even hike rates again. On the flip side, if things cool down faster than expected, a rate cut could come later this year.

What You Can Do Now

If you're unsure about what to do with your mortgage in this environment, here are a few simple steps:

• Review your current rate – Know what you're paying now and what your options are.
• Speak to a mortgage broker – We can shop the market for the best rates and advise you on timing.
• Consider pre-approval – If you're planning to buy, locking in a rate now could protect you from potential increases.

Final Thoughts

The Bank of Canada may have paused its interest rate hikes, but that doesn't mean we should celebrate just yet. Mortgage rates are not falling significantly, and the economic outlook remains mixed. However, this is a great time to start planning and positioning yourself for what comes next.

If you're interested in exploring your mortgage options or need assistance understanding how this situation affects your budget, let's discuss it. We are here to help you make confident and informed decisions about your home financing.

The Bank of Canada today maintained its target for the overnight rate at 2.75%, with the Bank Rate at 3% and the deposit rate at 2.70%.

Since the April Monetary Policy Report, the US administration has continued to increase and decrease various tariffs. China and the United States have stepped back from extremely high tariffs and bilateral trade negotiations have begun with a number of countries. However, the outcomes of these negotiations are highly uncertain, tariff rates are well above their levels at the beginning of 2025, and new trade actions are still being threatened. Uncertainty remains high.

While the global economy has shown resilience in recent months, this partly reflects a temporary surge in activity to get ahead of tariffs. In the United States, domestic demand remained relatively strong but higher imports pulled down first-quarter GDP. US inflation has ticked down but remains above 2%, with the price effects of tariffs still to come. In Europe, economic growth has been supported by exports, while defence spending is set to increase.  China's economy has slowed as the effects of past fiscal support fade. More recently, high tariffs have begun to curtail Chinese exports to the US. Since the financial market turmoil in April, risk assets have largely recovered and volatility has diminished, although markets remain sensitive to US policy announcements. Oil prices have fluctuated but remain close to their levels at the time of the April MPR.

In Canada, economic growth in the first quarter came in at 2.2%, slightly stronger than the Bank had forecast, while the composition of GDP growth was largely as expected. The pull-forward of exports to the United States and inventory accumulation boosted activity, with final domestic demand roughly flat. Strong spending on machinery and equipment held up growth in business investment by more than expected. Consumption slowed from its very strong fourth-quarter pace, but continued to grow despite a large drop in consumer confidence. Housing activity was down, driven by a sharp contraction in resales. Government spending also declined. The labour market has weakened, particularly in trade-intensive sectors, and unemployment has risen to 6.9%. The economy is expected to be considerably weaker in the second quarter, with the strength in exports and inventories reversing and final domestic demand remaining subdued.  

CPI inflation eased to 1.7% in April, as the elimination of the federal consumer carbon tax reduced inflation by 0.6 percentage points. Excluding taxes, inflation rose 2.3% in April, slightly stronger than the Bank had expected. The Bank's preferred measures of core inflation, as well as other measures of underlying inflation, moved up. Recent surveys indicate that households continue to expect that tariffs will raise prices and many businesses say they intend to pass on the costs of higher tariffs. The Bank will be watching all these indicators closely to gauge how inflationary pressures are evolving.

With uncertainty about US tariffs still high, the Canadian economy softer but not sharply weaker, and some unexpected firmness in recent inflation data, Governing Council decided to hold the policy rate as we gain more information on US trade policy and its impacts. We will continue to assess the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs.

Governing Council is proceeding carefully, with particular attention to the risks and uncertainties facing the Canadian economy. These include: the extent to which higher US tariffs reduce demand for Canadian exports; how much this spills over into business investment, employment and household spending; how much and how quickly cost increases are passed on to consumer prices; and how inflation expectations evolve. 

We are focused on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval. We will support economic growth while ensuring inflation remains well controlled.

Information note

The next scheduled date for announcing the overnight rate target is July 30, 2025. The Bank will publish its next MPR at the same time.

Source: Bank of Canada Website

If you're among the thousands of Canadian homeowners with a mortgage renewal coming up in 2025, you might already be concerned about what rising interest rates could mean for your monthly payments. During the pandemic, many Canadians took advantage of historically low rates. Now, as these mortgages approach renewal, many borrowers will face increased payments. But don't panic-we're here to guide you through this transition.

Why are payments going up?

During the pandemic's peak, interest rates in Canada dropped to unprecedented lows, allowing homeowners to secure mortgages with exceptionally favourable terms. Many Canadians chose variable-rate or fixed-rate mortgages at these low rates. As these terms now expire, renewals are happening in a different environment-interest rates are considerably higher than when many secured their initial mortgages.

According to the Bank of Canada's recent reports, about 60% of mortgages will renew in 2025 and 2026. For some homeowners, this might mean facing monthly payment increases of several hundred dollars or more.

What does this mean for homeowners?

Higher mortgage payments can significantly impact your monthly budget. However, this does not mean you're without options. Preparation, strategy, and professional advice can help ease the financial pressure.

What you can do now

1. Review Your Current Financial Situation

Before your renewal date arrives, take a close look at your finances. Calculate your monthly income and expenses, and identify areas where you can cut costs. This proactive approach will help you evaluate your ability to manage higher payments.

2. Consider Refinancing or Extending Your Mortgage

One effective way to manage increased payments is by refinancing your mortgage or extending the amortization period. Although extending your mortgage means you will pay interest over a longer time, it can significantly lower your monthly payments, giving you immediate financial relief. However, it's important to consider the short-term benefit of reduced payments against the long-term cost of paying additional interest.

3. Lock in Your Rate Early

If your renewal date is approaching and you are worried about possible rate increases, consider talking to your lender or mortgage broker about locking in your rate early. Securing your rate in advance can help protect you from potential future hikes.

4. Get Professional Advice

Mortgage renewals can be complex. Working with a mortgage professional can provide valuable insights into your options. Our brokerage specializes in helping homeowners find solutions tailored specifically to their financial situations. We can assist you in exploring alternatives such as refinancing, debt consolidation, and adjusting your mortgage terms to ensure your payments are manageable.

Common FAQs about Mortgage Renewals in 2025

Q1. How much could my monthly payments increase upon renewal?

The exact amount your payments will increase depends on several factors, including your current interest rate, your new rate upon renewal, and your remaining mortgage balance. Generally, borrowers renewing mortgages obtained during the pandemic at rates around 2-3% might see their rates increase to 4-6%, potentially raising monthly payments by hundreds of dollars.

Q2. Should I switch from a variable rate to a fixed-rate mortgage?

Choosing between a variable-rate and a fixed-rate mortgage depends on your risk tolerance and financial stability. Fixed rates offer certainty, especially valuable during times of economic unpredictability, while variable rates historically save money over the long term but come with uncertainty in monthly payment fluctuations. We recommend discussing your specific situation with a mortgage advisor to choose the best option for you.

Q3. Is refinancing my mortgage a good idea right now?

Refinancing can be beneficial if it helps reduce your monthly payment or consolidate higher-interest debts. However, it's crucial to evaluate your unique financial circumstances carefully. While refinancing may lower your payments now, extending your mortgage duration will mean paying more interest overall. A detailed conversation with one of our mortgage specialists can help determine if refinancing makes sense for your specific situation.

How We Can Help

We understand that navigating mortgage renewals in a changing interest rate environment can be stressful. Our team is committed to helping you clearly understand your options and guide you through the process with ease. We offer personalized consultations to discuss your financial goals and create tailored strategies to manage your renewal smoothly and confidently.

Don't let rising rates overwhelm you. Contact us today to discuss your upcoming mortgage renewal, and let's explore the best solutions for your financial peace of mind.

A friendly guide for Canadian homeowners who are about to renegotiate one of the biggest contracts of their lives.

Introduction - Why Everyone Is Talking About 2025 Renewals

If your mortgage is coming up for renewal between January and March 2025, you are not alone. Roughly one in three fixed rate mortgages in Canada will turn five years old during that window, thanks to the frantic home buying and refinancing wave of 2020 and 2021. Back then, rock bottom rates in the 1 percent range felt like a gift. Today, the rate landscape looks very different, but it is also improving more quickly than many expected even a year ago.

Early 2025 could be the sweet spot where policy maker caution, receding inflation, and hefty competition among lenders converge to give borrowers new negotiating power. Let's unpack the numbers, the forecasts, and-most importantly-what you can do right now to walk into your renewal meeting with confidence.

1. How We Got Here: A Capsule History of Rates 2020 - 2024

• Spring 2020: The Bank of Canada slashes its overnight target to 0.25 percent to fight a pandemic induced recession. Variable mortgages dip under 1.5 percent.
• 2021: Housing demand surges and five year Government of Canada bond yields remain below 1 percent. Lenders market five year fixed mortgages at record lows.
• 2022 through mid 2023: A global inflation spike forces the Bank of Canada into its fastest hiking cycle in 30 years, lifting the overnight rate to 5 percent. Five year fixed mortgages flirt with 6 percent.
• Late 2023 through 2024: Inflation cools. The Bank of Canada pivots to an easing cycle, trimming rates six times.
• By April 16 2025 the overnight rate sits at 2.75 percent, the lowest level since the hikes began.

2. Where We Stand Right Now - May 2025 Snapshot

• Bank of Canada overnight target: 2.75 percent. This sets the floor for variable mortgages and influences short term bond yields.
• Inflation (CPI, March 2025): 2.3 percent year over year, now inside the Bank's comfort band which eases pressure for further hikes.
• Five year Government of Canada bond yield: About 2.8 percent as of early May. This benchmark drives most five year fixed rate mortgages.
• Typical mortgage pricing: Uninsured five year fixed rates fall in the high 3 percent to low 4 percent range. Variable rates sit just above prime, currently near 4.95 percent.

3. The Five Forces That Will Drive Mortgage Rates Into Early 2025

• Bank of Canada policy path: Several major banks see another 50 to 75 basis points of cuts by July 2025 which would bring the overnight rate close to 2 percent. Variable and adjustable rate mortgages would fall and fixed rate discounts would widen.
• Inflation trajectory: Most forecasters expect CPI to drift toward 2 percent and stay there. A surprise uptick would stall or reverse rate cuts.
• Bond market expectations: Traders have largely priced in two Bank of Canada cuts by February 2025. If growth weakens, yields could fall another 30 to 40 basis points.
• Global central bank moves: Divergence from the United States Federal Reserve is pushing the loonie lower, but the Bank of Canada says it still has room to cut. A softer Canadian dollar can trim lenders' funding margins.
• Housing market momentum: CMHC expects sales to pick up as affordability improves, especially in the Prairies and Quebec, increasing competition among lenders for market share.

4. What the Big Banks and Analysts Are Predicting

• RBC Economics: Overnight rate at 2 percent by mid 2025 and five year bond yields averaging 2.5 percent.
• TD Economics: Five year bond yield flat around 2.75 percent to start 2025, drifting lower later in the year.
• BMO Capital Markets: Overnight rate down to 2.25 percent by Q3 2025 but warns the pace could slow if tariffs and fiscal uncertainty linger.
• CIBC Asset Management: Sees a 2.5 percent policy rate by year end 2025 with bond yields still attractive versus 15 year averages.

Consensus takeaway: Additional downside for mortgage rates is modest but real-think another 0.25 to 0.50 percentage points by early 2025 unless inflation flares up again.

5. Three Scenarios for Your Renewal Quote

• Base Case: Slow and steady cuts. Overnight rate 2.50 percent. Typical five year fixed 3.65 to 3.95 percent. Typical variable prime minus 0.75 percent. Probability about 55 percent.
• Rosy: Inflation melts and global growth cools. Overnight rate 2.25 percent. Five year fixed 3.25 to 3.55 percent. Variable prime minus 1.00 percent. Probability about 25 percent.
• Sticky: Inflation stalls above 2.5 percent. Overnight rate 2.75 percent. Five year fixed 3.90 to 4.25 percent. Variable prime minus 0.50 percent. Probability about 20 percent.

6. Renewal Playbook - Six Actions to Take Right Now

• Start the conversation 120 days out. Most lenders will hold today's lower rate for up to four months, giving you a free option if rates rise.
• Request multiple quotes. Big five banks, credit unions, and broker channel monolines price differently. A 0.20 percent spread on a 450 000 dollar balance saves about 900 dollars per year.
• Compare short term fixed terms. A three year fixed at 3.45 percent today could beat a five year at 3.95 percent if the overnight rate reaches 2 percent by 2026.
• Ask about a variable with an adjustable payment. If cash flow is tight, a static payment variable can smooth monthly costs while capturing future cuts.
• Check the fine print on penalty calculations. Some lenders use a hefty interest rate differential. Switching at renewal time avoids penalties entirely.
• Refresh your budget and credit. A strong credit score over 720 can unlock lender paid appraisal fees or rate buydowns worth hundreds.

7. Frequently Asked Questions

• Should I renew early in late 2025 instead? If your lender lets you renew six months early, watch bond yields. Lock early only if five year yields look poised to jump above 3 percent. Otherwise, the trend is still gently lower.
• Is it worth paying a fee to break now and refinance? Crunch the math. If you can drop your rate by more than 1 percent and you have at least three years left, the savings may eclipse the penalty, but in most cases waiting for natural renewal in 2025 is cheaper.
• What about converting my variable to fixed today? With the Bank of Canada actively cutting, converting right now often locks in a higher payment. Ask your broker to model both paths.
• Will the mortgage stress test get easier? OSFI still uses the greater of 5.25 percent or your contract rate plus 2 percent. As contract rates fall, qualifying gets easier automatically even if the formula does not change.

8. The Bottom Line - Your 2025 Renewal Could Be a Rare Window of Opportunity

Inflation is almost back in its cage, the Bank of Canada still has room to lower rates, and lenders are hungry for stable, low risk refinance business. That combination could bring five year fixed mortgages back into the low 3 percent range for well qualified borrowers in early 2025.

But markets can and do swerve. Hedge your bets by starting early, gathering competing offers, and leaning on an experienced mortgage broker who keeps one eye on bond screens and the other on your household balance sheet.

When you are ready to explore the options, reach out. I will comb the market for the sharpest renewal rate and translate every line of the fine print so you can focus on enjoying your home, not fretting about your mortgage.

Happy house holding, and here's to a smoother and cheaper 2025!

The Bank of Canada today maintained its target for the overnight rate at 2.75%, with the Bank Rate at 3% and the deposit rate at 2.70%.

The major shift in direction of US trade policy and the unpredictability of tariffs have increased uncertainty, diminished prospects for economic growth, and raised inflation expectations. Pervasive uncertainty makes it unusually challenging to project GDP growth and inflation in Canada and globally. Instead, the April Monetary Policy Report (MPR) presents two scenarios that explore different paths for US trade policy. In the first scenario, uncertainty is high but tariffs are limited in scope. Canadian growth weakens temporarily and inflation remains around the 2% target. In the second scenario, a protracted trade war causes Canada's economy to fall into recession this year and inflation rises temporarily above 3% next year. Many other trade policy scenarios are possible. There is also an unusual degree of uncertainty about the economic outcomes within any scenario, since the magnitude and speed of the shift in US trade policy are unprecedented.

Global economic growth was solid in late 2024 and inflation has been easing towards central bank targets. However, tariffs and uncertainty have weakened the outlook. In the United States, the economy is showing signs of slowing amid rising policy uncertainty and rapidly deteriorating sentiment, while inflation expectations have risen. In the euro area, growth has been modest in early 2025, with continued weakness in the manufacturing sector. China's economy was strong at the end of 2024 but more recent data shows it slowing modestly.

Financial markets have been roiled by serial tariff announcements, postponements and continued threats of escalation. This extreme market volatility is adding to uncertainty. Oil prices have declined substantially since January, mainly reflecting weaker prospects for global growth. Canada's exchange rate has recently appreciated as a result of broad US dollar weakness.

In Canada, the economy is slowing as tariff announcements and uncertainty pull down consumer and business confidence. Consumption, residential investment and business spending all look to have weakened in the first quarter. Trade tensions are also disrupting recovery in the labour market. Employment declined in March and businesses are reporting plans to slow their hiring. Wage growth continues to show signs of moderation. 

Inflation was 2.3% in March, lower than in February but still higher than 1.8% at the time of the January MPR. The higher inflation in the last couple of months reflects some rebound in goods price inflation and the end of the temporary suspension of the GST/HST. Starting in April, CPI inflation will be pulled down for one year by the removal of the consumer carbon tax. Lower global oil prices will also dampen inflation in the near term. However, we expect tariffs and supply chain disruptions to push up some prices. How much upward pressure this puts on inflation will depend on the evolution of tariffs and how quickly businesses pass on higher costs to consumers. Short-term inflation expectations have moved up, as businesses and consumers anticipate higher costs from trade conflict and supply disruptions. Longer term inflation expectations are little changed.

Governing Council will continue to assess the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs. Our focus will be on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval. This means we will support economic growth while ensuring that inflation remains well controlled.

Governing Council will proceed carefully, with particular attention to the risks and uncertainties facing the Canadian economy. These include: the extent to which higher tariffs reduce demand for Canadian exports; how much this spills over into business investment, employment and household spending; how much and how quickly cost increases are passed on to consumer prices; and how inflation expectations evolve. 

Monetary policy cannot resolve trade uncertainty or offset the impacts of a trade war. What it can and must do is maintain price stability for Canadians.

Information note

The next scheduled date for announcing the overnight rate target is June 4, 2025. The Bank will publish its next MPR on July 30, 2025.

Source: Bank of Canada Website