Why the Bank of Canada Cut Rates Yesterday — and What It Means for You

Emily Miszk
Oct 30
3 min read

The Bank of Canada cut its key overnight rate by 0.25% yesterday, bringing it down to 2.25%. This decision was widely expected, but the tone that came with it is what really matters —

Governor Tiff Macklem knows what’s coming, and he made his move.

The new Commercial Bank Prime Rate is now 4.45%, and that’s good news for anyone with a variable-rate mortgage or home equity line of credit (HELOC).

Why the Bank Made This Move

Let’s be honest — the simple answer is that the Canadian economy is struggling.

The Bank of Canada receives data from major lenders daily, and it’s painting a clear picture:

Credit card balances are climbing.
Mortgage default rates are rising.
Auto loans are going sour.

All classic signs of a recession either approaching or already here.

Yes, the most recent inflation report showed a slight bump, but the Bank of Canada can’t make more beef or fix global coffee harvests. What it can do is try to stimulate spending and ease pressure on borrowers by lowering borrowing costs.

By cutting rates, the Bank is giving Canadians some relief — and hoping to keep the economy moving through what looks like a slower, more uncertain stretch ahead.

Where We Are Now

The current rate of 2.25% is considered neutral by the Bank.

Anything above 3% is seen as restrictive — meaning it slows the economy down.
Anything below 2.25% is considered stimulus — essentially trying to spark growth.

So where do we go from here? If the economy continues to weaken, more cuts are likely. I wouldn’t be surprised to see another two cuts in early 2026 if conditions don’t improve.

For now, the Bank is trying to balance between supporting growth and keeping inflation close to its 2% target. But make no mistake — the economic data will drive future decisions, not the press conference soundbites.

What This Means for Homeowners

If you have a variable-rate mortgage or line of credit, you’ll see a small but welcome drop in your rate. You can expect your payment to decrease by roughly $14 for every $100,000 owing.

For example:If your mortgage is $500,000, that’s about $70 less per month starting at your next payment date.

If you’d like to pay your mortgage off faster, call your lender and ask them not to lower your payment after this rate cut. Keeping your payment steady means more money goes directly toward your principal — and less toward interest.

If you’re in a fixed-rate mortgage, you won’t see a change. Fixed rates follow bond yields, which haven’t moved much this month.

What About Inflation?

The Bank’s preferred measures of core inflation have been hovering near 3%, but the expectation is that they’ll start trending lower. The next key inflation report arrives November 17th, and everyone will be watching to see if CPI Median and Trimmed-Mean inflation move below that 3% line.

What Happens Next

The next Bank of Canada interest rate announcement is scheduled for December 10, 2025, with a fresh Monetary Policy Report coming January 28, 2026.

Between now and then, expect the Bank to watch the data closely — employment, spending, and inflation — before deciding whether further cuts are needed.

For now, the message is clear:

Variable-rate borrowers can expect a small payment drop.
Fixed-rate borrowers won’t see a change.
The economy is slowing, and the Bank is responding cautiously.
Savers with GICs or high-interest savings accounts… condolences — your returns just went down again.