Bank of Canada Kicks Off 2025 with a Rate Cut and Balance Sheet Normalization
Marci Deane • January 30, 2025
The Bank of Canada has lowered its overnight rate by 25 basis points—the sixth cut since June last year. It also plans to end quantitative tightening and normalize its balance sheet.
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This brings the BOC rate to 3.00% and we expect lenders to cut their Prime Lending rate to 5.20%. This is all good news and will help variable rate mortgage holders.
However, the Bank warns of "more-than-usual uncertainty," especially with potential U.S. trade tariffs on the horizon. To say that predictions about future rate trajectory are tricky is quite the understatement at this point. Below is a summary of all the factors impacting the Canadian Economy, the Bank of Canada and interest rates right now.
Canadian Economy & Housing
- Lower rates are boosting the economy, with consumer spending and housing activity picking up.
- Business investment remains weak.
- Exports should benefit from new oil and gas capacity.
Inflation Outlook
- CPI inflation is near 2%, though temporarily affected by the GST/HST suspension on some goods.
- Housing costs are still high but gradually easing.
- Broad indicators suggest underlying inflation is very close to the 2% target.
- The Bank expects inflation to remain near 2% over the next two years.
Labour Market
- Unemployment sits at 6.7%, signaling a soft labour market.
- Job growth has picked up after lagging behind workforce expansion.
- Wage pressures are easing, but progress has been slow.
Global Economy, Bond Yields & Canadian Dollar
- Global GDP is expected to grow 3% annually over the next two years.
- U.S. growth is stronger than expected, while Europe lags.
- China’s economy is stabilizing after recent policy support.
- U.S. bond yields have risen, but Canadian yields are down slightly.
- The Canadian dollar has weakened against the U.S. dollar due to trade uncertainty.
- Oil prices have been volatile, recently settling about $5 higher than October projections.
Other Key Announcements
- The Bank will complete balance sheet normalization and resume asset purchases in March 2025.
- With inflation near 2% and the economy in excess supply, the Bank deemed a rate cut necessary.
- The impact of rate cuts since June has been "substantial," fueling household spending and gradual economic strengthening.
Outlook from the BOC today:
- The Bank projects 1.8% GDP growth for both 2025 and 2026.
- Lower immigration targets will slow population growth, moderating overall economic expansion.
- The risks in the outlook are "reasonably balanced" unless U.S. trade tensions escalate, which could weaken GDP and push prices higher.
- The Bank reaffirmed its commitment to price stability.
Bottom line: The Bank is cutting rates to support growth, but uncertainties—especially trade risks—loom large. So, what to do? Variable rate or Fixed rate? The jury is out on this for the moment but less risk averse borrowers may want to consider a Variable if they believe recessionary pressures will push rates down. The counter argument to this is that Tariffs could cause inflation and thus, push the BOC to increase rates.
Given this chance, risk averse borrowers might therefore prefer to “set it and forget it” with a fixed rate. It comes down to a very personal decision and analyzing the financial position and future goals for each borrower.
Please reach out to review your personal plans and we can help you weigh the risks based on your personal financial situation.
It was an honour to be asked by CTV to share some thoughts on all of this and the local real estate market. You may have caught me on the early news last night, or you can read the article.
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Divorces are challenging as there’s a lot to think about in a short amount of time, usually under pressure. And while handling finances is often at the forefront of the discussions related to the separation of assets, unfortunately, managing and maintaining personal credit can be swept aside to deal with later. So, if you happen to be going through or preparing for a divorce or separation, here are a few considerations that will help keep your credit and finances on track. The goal is to avoid significant setbacks as you look to rebuild your life. Manage Your Joint Debt If you have joint debt, you are both 100% responsible for that debt, which means that even if your ex-spouse has the legal responsibility to pay the debt, if your name is on the debt, you can be held responsible for the payments. Any financial obligation with your name on the account that falls into arrears will negatively impact your credit score, regardless of who is legally responsible for making the payments. A divorce settlement doesn’t mean anything to the lender. The last thing you want is for your ex-spouse’s poor financial management to negatively impact your credit score for the next six to seven years. Go through all your joint credit accounts, and if possible, cancel them and have the remaining balance transferred into a loan or credit card in the name of whoever will be responsible for the remaining debt. If possible, you should eliminate all joint debts. Now, it’s a good idea to check your credit report about three to six months after making the changes to ensure everything all joint debts have been closed and everything is reporting as it should be. It’s not uncommon for there to be errors on credit reports. Manage Your Bank Accounts Just as you should separate all your joint credit accounts, it’s a good idea to open a checking account in your name and start making all deposits there as soon as possible. You’ll want to set up the automatic withdrawals for the expenses and utilities you’ll be responsible for going forward in your own account. At the same time, you’ll want to close any joint bank accounts you have with your ex-spouse and gain exclusive access to any assets you have. It’s unfortunate, but even in the most amicable situations, money (or lack thereof) can cause people to make bad decisions; you want to protect yourself by protecting your assets. While opening new accounts, chances are your ex-spouse knows your passwords to online banking and might even know the pin to your bank card. Take this time to change all your passwords to something completely new, don’t just default to what you’ve used in the past. Better safe than sorry. Setup New Credit in Your Name There might be a chance that you’ve never had credit in your name alone or that you were a secondary signer on your ex-spouse’s credit card. If this is the case, it would be prudent to set up a small credit card in your name. Don’t worry about the limit; the goal is to get something in your name alone. Down the road, you can change things and work towards establishing a solid credit profile. If you have any questions about managing your credit through a divorce, please don’t hesitate to connect anytime. It would be a pleasure to work with you.
Bank of Canada holds policy rate at 2¾%. FOR IMMEDIATE RELEASE Media Relations Ottawa, Ontario June 4, 2025 The Bank of Canada today maintained its target for the overnight rate at 2.75%, with the Bank Rate at 3% and the deposit rate at 2.70%. Since the April Monetary Policy Report, the US administration has continued to increase and decrease various tariffs. China and the United States have stepped back from extremely high tariffs and bilateral trade negotiations have begun with a number of countries. However, the outcomes of these negotiations are highly uncertain, tariff rates are well above their levels at the beginning of 2025, and new trade actions are still being threatened. Uncertainty remains high. While the global economy has shown resilience in recent months, this partly reflects a temporary surge in activity to get ahead of tariffs. In the United States, domestic demand remained relatively strong but higher imports pulled down first-quarter GDP. US inflation has ticked down but remains above 2%, with the price effects of tariffs still to come. In Europe, economic growth has been supported by exports, while defence spending is set to increase. China’s economy has slowed as the effects of past fiscal support fade. More recently, high tariffs have begun to curtail Chinese exports to the US. Since the financial market turmoil in April, risk assets have largely recovered and volatility has diminished, although markets remain sensitive to US policy announcements. Oil prices have fluctuated but remain close to their levels at the time of the April MPR. In Canada, economic growth in the first quarter came in at 2.2%, slightly stronger than the Bank had forecast, while the composition of GDP growth was largely as expected. The pull-forward of exports to the United States and inventory accumulation boosted activity, with final domestic demand roughly flat. Strong spending on machinery and equipment held up growth in business investment by more than expected. Consumption slowed from its very strong fourth-quarter pace, but continued to grow despite a large drop in consumer confidence. Housing activity was down, driven by a sharp contraction in resales. Government spending also declined. The labour market has weakened, particularly in trade-intensive sectors, and unemployment has risen to 6.9%. The economy is expected to be considerably weaker in the second quarter, with the strength in exports and inventories reversing and final domestic demand remaining subdued. CPI inflation eased to 1.7% in April, as the elimination of the federal consumer carbon tax reduced inflation by 0.6 percentage points. Excluding taxes, inflation rose 2.3% in April, slightly stronger than the Bank had expected. The Bank’s preferred measures of core inflation, as well as other measures of underlying inflation, moved up. Recent surveys indicate that households continue to expect that tariffs will raise prices and many businesses say they intend to pass on the costs of higher tariffs. The Bank will be watching all these indicators closely to gauge how inflationary pressures are evolving. With uncertainty about US tariffs still high, the Canadian economy softer but not sharply weaker, and some unexpected firmness in recent inflation data, Governing Council decided to hold the policy rate as we gain more information on US trade policy and its impacts. 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. Governing Council is proceeding carefully, with particular attention to the risks and uncertainties facing the Canadian economy. These include: the extent to which higher US tariffs reduce demand for Canadian exports; how much this spills over into business investment, employment and household spending; how much and how quickly cost increases are passed on to consumer prices; and how inflation expectations evolve. We are focused on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval. We will support economic growth while ensuring inflation remains well controlled. Information note The next scheduled date for announcing the overnight rate target is July 30, 2025. The Bank will publish its next MPR at the same time.
If you’re new to Canada, on a work permit, or simply curious about buying a home in British Columbia as a non-resident, you may have heard some conflicting info. Between federal bans and provincial taxes, it can feel like a maze. ο»Ώ Let’s break it down – simply and clearly – so you know what’s actually possible. π« The Federal Ban on Foreign Buyers (Until 2027) In early 2023, the Canadian government introduced a two-year ban on foreign nationals purchasing residential real estate. In 2024, that ban was extended until January 1, 2027 . β Who’s affected: Foreign nationals who are not Canadian citizens or permanent residents Corporations and entities based outside of Canada β
Who’s exempt and can still buy: People on valid work permits (183+ days remaining at time of purchase) Certain international students (who’ve filed 5+ years of Canadian tax returns and are buying under $500K) Refugees or protected persons Those buying jointly with a Canadian spouse or partner π Important : Even if you’re allowed to buy under federal rules, there are still provincial taxes to consider. The B.C. Foreign Buyer Tax (a.k.a. the Additional Property Transfer Tax) If you’re a foreign buyer and you’re purchasing property in designated parts of B.C. (including Metro Vancouver, Victoria, Fraser Valley, Kelowna, and Nanaimo), you’ll pay an extra 20% on top of the home’s price. Example: Buying a $1.2 million home as a non-exempt foreign buyer? Standard B.C. Property Transfer Tax: $22,000 Additional 20% Tax : $240,000 Total in taxes : $262,000 π¬ Yep – that adds up fast. How to avoid the 20%: You may be exempt if: You’re a B.C. Provincial Nominee Program (PNP) participant buying your primary residence You’re a Canadian citizen or permanent resident You qualify for certain refunds after becoming a permanent resident within a year What Should You Do? If you’re on a work permit or navigating immigration pathways – you may still be able to buy , but it’s critical to understand the rules and the costs. As a mortgage broker, I’ve helped many newcomers figure out: If they’re eligible to buy What taxes apply (and how to reduce them!) What mortgage options are available Want the Full Breakdown? I’ve created a free, downloadable one-page Foreign Buyer Reference Guide with a full tax breakdown and clear examples. π
[Click here to download it now] Have questions about whether you can buy property in B.C.? Let’s chat. Ask Marci About Mortgages. β
Honest advice. β
Clear answers. β
No confusion.
