How the Bank of Canada’s rate hold could impact you

Key Takeaways:

• The Bank of Canada (BoC) just announced it is holding its lending rate steady at 2.75%
• This means that borrowing rates on many financial products, such as loans and mortgages, are unchanged
• TD Economics predicts that rate relief will come at some point in 2025, and the BoC could cut its rate by 50 basis points total by the end of the year
• The next BoC rate announcement is on September 17

Canada’s central bank is holding its lending rate steady at 2.75% for the summer.

On July 30, the Bank of Canada (BoC) announced it is yet again maintaining its lending rate following a previous rate hold in June.

In its announcement, the BoC said: "With still high uncertainty, the Canadian economy showing some resilience, and ongoing pressures on underlying inflation, Governing Council decided to hold the policy interest rate unchanged. 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 related to tariffs and the reconfiguration of trade."

Leslie Preston, Managing Director & Senior Economist at TD Economics, said the rate hold is not surprising.

"Canada's economy is holding up better so far than most have feared,” Preston said. “That, paired with elevated core inflation, means the Bank of Canada has more time to assess the current market uncertainty before it makes its next move."

What a rate hold could mean for Canadians

The BoC’s lending rate is used as a benchmark by banks to set interest rates on financial products such as mortgages, personal loans, and business loans.

So, when the BoC cuts its lending rate, it can become cheaper to borrow money. And when the BoC’s lending rate goes up, it can become more expensive.

When the BoC holds its lending rate steady, not much changes for Canadians. For Canadians with both variable rate mortgages and fixed rate mortgages, things will remain status quo.

Will the Bank of Canada cut its lending rate in 2025?

Preston said that while the BoC opted to hold its rate in July, two cuts of 25 basis points each could be coming in the near future.

“As economic fallout from the tariffs becomes evident, TD Economics expects the Bank of Canada to reduce its lending rate further, taking it to 2.25% by the end of the year,” Preston said.

“This should provide more support to growth down the line, particularly in residential investment, where we expect pent-up demand for housing to start contributing to growth again in the second half of this year.”

The next BoC rate announcement is on September 17.