Bank Prime Rate Today 5.20%
On January 29, 2025, the Bank of Canada reduced its target for the overnight rate by 25 basis points to 3%. This decision was influenced by concerns over potential economic impacts from proposed U.S. tariffs on Canadian imports. The Bank also announced plans to end its quantitative tightening program and will begin asset purchases in early March to stabilize its balance sheet.
In its statement, the Bank highlighted “more-than-usual uncertainty” due to the threat of trade tariffs. While no specific tariff assumptions were included in their forecast, the Bank acknowledged that such threats could affect financial markets and business decisions. The Bank projects solid economic growth, averaging 1.8% in 2025 and 2026, with core inflation expected to reach 2.1% by the end of 2025.
Governor Tiff Macklem emphasized that a prolonged and broad-based trade conflict could significantly harm Canada’s economic activity. He noted that while inflation is around 2% and the economy has excess supply, the Bank decided to reduce the policy rate to support economic growth.
Variable and Fixed Rates
Good news for clients who have variable mortgages and secured lines of credit, Prime has decreased to 5.20% to the lowest level since Sept 2022. Many variable mortgages are in what is called an adjustable-rate mortgage (ARM). So when rate decrease your mortgage payment will also adjust downwards to reflect your current amortization. Experts are continuing to support a longer outlook of decreasing rates. However, with the recent events regarding a potential trade war with the United States we may see some fluctuations short term to ensure inflation stays in check. We have seen Lenders variable rate mortgages have also decreased their rate discounts. Both and fixed and variable rates are becoming equal in the market place which we have not seen for a while.
Fixed Rates have remained stable however over the last week the Bond market has dropped to levels we have not seen since July 2022. The bond market has become volatile over the past week and expect this to continue until the tariffs imposed by both USA and Canada resolve. So there maybe some ups and downs during this turbinate time.
Understanding your risk level and interest rate expectations will determine if you choose a variable rate or if you want stability/predictability of your payment of a fixed rate. We are here to answer your questions and help weigh the risks between the two options for you.