Bank of Canada July Rate Update
Bank of Canada Holds Rates Steady: What It Means for Mortgage Borrowers
On July 30, 2025, the Bank of Canada announced it is holding its key interest rate steady at 2.75%. This marks the third straight rate hold this year, following seven rate cuts earlier in 2025.
While the decision wasn’t surprising, it sends a clear signal: the Bank is staying cautious as it watches how inflation, trade uncertainty, and economic growth unfold.
So, what does this mean for you as a homeowner or someone planning to buy?
🔍 Important clarification: The overnight rate is NOT the same as the banks' Prime Rate. While the BoC rate stayed at 2.75%, the Prime Rate remains at 4.95%.
Why the Bank Held Rates Steady
There’s a lot happening in the background – including US tariffs that are disrupting trade and raising the cost of goods. At the same time, Canada’s economy is cooling down, which is helping to slow inflation.
The Bank is trying to balance two forces:
- Inflation pressures from global trade shifts and tariffs
- Economic slowdown, which usually pushes prices lower
By holding the rate, the Bank is taking a "wait-and-see" approach before making any more moves.
Inflation: Cooling, But Still a Factor
Inflation is hovering close to the Bank’s 2% target.
- Shelter costs (like rent and mortgage interest) are still the biggest contributor to inflation.
- Other goods (excluding energy) have also seen modest price increases.
- Businesses expect inflation to ease, but consumers aren’t feeling it just yet.
The Bank believes underlying inflation will slowly unwind over time, especially as the economy operates with some slack and the Canadian dollar strengthens.
The Canadian Economy: Slower, But Resilient
In the second quarter of 2025, Canada’s economy likely contracted, mostly due to a drop in exports. However:
- Employment is holding up in most sectors
- Consumer and business confidence is improving
- Residential investment is expected to bounce back in late 2025
Overall, the Bank is forecasting modest growth in the second half of the year, with a stronger rebound in 2026 and 2027 if trade tensions ease.
Could Rates Drop Again?
Yes — if inflation continues to ease and the economy stays soft, the Bank may lower its rate one more time before the end of 2025, potentially down to 2.50%.
That would bring rates into the “neutral zone,” where they neither slow nor stimulate the economy too aggressively.
To get a better understanding of how interests rates are set, let’s go back to some basics:
Fixed-rate mortgage rates in Canada are priced off of Government of Canada 5-year bond yields that are, in turn, influenced by the U.S. Treasuries.
Variable-rate mortgages are affected by the Bank of Canada's monetary policy, namely interest rate hikes and cuts that, in turn, impacts commercial banks' Prime lending rate.
Understanding the Prime Rate in Canada:
The Prime Rate is the interest rate that major banks in Canada use to set interest rates for variable loans/mortgages and lines of credit. It’s influenced by the Bank of Canada’s Overnight Rate, which is the rate at which banks borrow and lend to each other overnight.
Consider the prime rate as the foundation upon which these other interest rates are built. As the prime rate in Canada fluctuates, the interest rate you pay on your adjustable/variable rate mortgage also adjusts accordingly.
If you are like me, and you like to look at numbers, here is a table summarizing the Prime Rate changes in Canada from 2010 to today:
| Effective Date | Prime Rate | Change |
|---|---|---|
July 30, 2025 | 4.95% | 0.00% |
June 04, 2025 | 4.95% | 0.00% |
April 16th, 2025 | 4.95% | 0.00% |
| March 12th, 2025 | 4.95% | -0.25% |
| Jan 29th, 2025 | 5.25% | -0.25% |
| Dec 11th, 2025 | 5.45% | -0.50% |
| October 23, 2024 | 5.95% | -0.50% |
| Sept 4, 2024 | 6.45% | -0.25% |
| July 24, 2024 | 6.70% | -0.25% |
| June 5, 2024 | 6.95% | -0.25% |
| July 12, 2023 | 7.20% | +0.25% |
| June 8, 2023 | 6.95% | +0.25% |
| January 25, 2023 | 6.70% | +0.25% |
December 8, 2022 | 6.45% | +0.50% |
| October 27, 2022 | 5.95% | +0.50% |
| September 8, 2022 | 5.45% | +0.75% |
| July 14, 2022 | 4.70% | +1.00% |
June 2, 2022 | 3.70% | +0.50% |
April 14, 2022 | 3.20% | +0.50% |
| March 3, 2022 | 2.70% | +0.50% |
| March 30, 2020 | 2.45% | -0.50% |
| March 17, 2020 | 2.95% | -0.50% |
| March 5, 2020 | 3.45% | -0.50% |
October 25, 2018 | 3.95% | +0.25% |
| July 12, 2018 | 3.70% | +0.25% |
| January 18, 2018 | 3.45% | +0.25% |
| September 7, 2017 | 3.20% | +0.25% |
| July 13, 2017 | 2.95% | +0.25% |
| July 16, 2015 | 2.70% | -0.15% |
| January 28, 2015 | 2.85% | -0.15% |
| September 9, 2010 | 3.00% | +0.25% |
| July 21, 2010 | 2.75% | +0.25% |
| June 2, 2010 | 2.50% | +0.25% |
What Should Mortgage Borrowers Do?
This stable rate environment is a smart time to plan ahead:
If you’re buying, today’s market offers an opportunity to get pre-approved and prepare for future rate drops.
If you’re renewing or refinancing, you may want to lock in now or explore flexible options with a mortgage professional.
📆 The next rate announcement is on September 17, 2025.
We'll be watching closely for signs of change — and keeping you informed.
Need guidance tailored to your mortgage situation?
I’d be happy to help you explore your options and make a plan that works for your goals.
Let’s chat!
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