On July 30, 2025, the Bank of Canada announced it would hold its key interest rate steady at 2.75%. In other words, there is no change in the central bank’s benchmark rate after this latest interest rate announcement. This decision keeps borrowing costs the same as they have been in recent months, which was expected by many experts given current economic conditions.
Why Was the Interest Rate Held Steady?
Why didn’t the Bank of Canada change the interest rate? Simply put, the economy isn’t as weak as some feared, and inflation isn’t yet low enough to cut rates. In its statement, the Bank noted there is still uncertainty in the global outlook but also “the Canadian economy showing some resilience” along with ongoing inflation pressures. One economist explained that Canada’s economy is holding up better than expected, and core inflation remains a bit high – this gives the Bank of Canada more time to be patient before making any move. Essentially, the Bank chose to wait and watch rather than raise or lower the rate right now.
Another reason for the hold is that interest rates have already fallen a lot since last year. After a series of rate cuts in 2024 and early 2025, the policy interest rate dropped from a high of 5.0% down to 2.75%. This is considered a more neutral level, helping to balance the economy. Keeping the rate unchanged at this level allows the Bank to see how earlier rate reductions are affecting the economy before deciding on any further changes.
What the Interest Rate Hold Means for Homebuyers
For homebuyers and homeowners, a steady interest rate brings some relief and certainty. Here are key effects of the Bank’s decision on the real estate market and mortgages:
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No immediate change in mortgage payments: With the interest rate staying at 2.75%, banks’ prime rates remain around 4.95% for variable loans. This means borrowing rates on mortgages and other loans stay the same. If you have a variable-rate mortgage, your rate and monthly payment won’t go up. Fixed-rate mortgage holders are also unaffected by this announcement – your rate stays locked in. In short, things remain status quo for Canadians with mortgages.
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Affordability remains stable: Because rates did not rise, the cost of borrowing for a new home loan isn’t increasing. This stability can help buyers plan their budgets with confidence. At 2.75%, the interest rate is much lower than the 5% peak seen last year, which has already eased some pressure on buyers. Keeping the rate steady means new mortgages won’t get more expensive, which is good news for those looking to purchase a property or invest in pre-construction homes.
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Possible relief on the horizon: Interest rates may decline further this year. TD Economics predicts the Bank of Canada could cut rates by 0.50% by the end of 2025, bringing the policy rate to 2.25%. This would likely lower mortgage costs and boost affordability. If borrowing becomes cheaper, more buyers may return to the market, increasing home sales. It’s a hopeful sign for both buyers and sellers.
It’s also worth noting that in Ontario’s real estate market, high interest rates over the past year had cooled activity. Now, with rates stabilizing at a lower level, buyers in Ontario may feel more confident about entering the market. Stable or falling interest rates can improve affordability, allowing more first-time buyers and investors to qualify for mortgages. Even renters could be indirectly affected: if borrowing stays affordable, some renters might decide to buy homes, and landlords won’t face higher interest costs on their mortgages (which can translate into rent increases). Overall, the interest rate hold is a positive sign for those looking at homes, condos, or investment properties – it removes the immediate worry of rising loan costs.
Outlook – Will Interest Rates Change Later in 2025?
Looking ahead, many are wondering what’s next for interest rates. The next Bank of Canada rate announcement is scheduled for September 17, 2025. By that time, the Bank will review new data on the economy. If economic growth slows or inflation comes down closer to the 2% target, the Bank could decide to cut the interest rate in late 2025. As noted earlier, some forecasts call for a modest rate reduction before year-end. For example, if the overnight rate drops to 2.25%, that would likely lead to lower mortgage rates for consumers and potentially give the housing market another boost. Lower rates make it cheaper to borrow, which can bring more buyers into the market and increase demand for homes.
However, it’s important to remember that nothing is guaranteed. The Bank of Canada will be cautious. If inflation stays higher than desired or if the economy shows unexpected strength, the Bank might hold the interest rate steady for longer. On the other hand, if signs point to a weaker economy (for instance, fallout from trade tensions or other factors), the Bank has signaled it is ready to act quickly and cut rates to support growth.
In summary, the current interest rate hold means stability for borrowers. It’s one less thing for homebuyers and homeowners to worry about this summer. You can take advantage of this period to plan your home purchase or refinancing without fearing an imminent spike in interest costs. Keep an eye on the Bank of Canada’s updates in the coming months. Any changes in the interest rate will directly affect mortgage rates and the real estate market. For now, the steady interest rate is providing a breather, and potentially setting the stage for improved affordability if rates do decline as predicted.
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