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Why the Bank of Canada’s Rate Pause Isn’t a Green Light for Cheap Mortgages

June 8, 2025 | Posted by: The Mortgage Providers

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.

Feel free to contact us for GTA Construction Financing, GTA Private Mortgage Funding, GTA Residential and Commercial Mortgages, and more!

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