If you were hoping for more interest rate relief in 2025, experts say that might not be on the cards anymore. According to a recent forecast by RBC, the Bank of Canada (BoC) has likely wrapped up its rate-cutting cycle—for now.
While other major banks still expect one or two more cuts, RBC believes the economic landscape has changed enough to support holding rates steady. As trade tensions ease, government fiscal support increases, and consumer sentiment improves, the need for further monetary easing appears to be fading.
Why the Bank of Canada Might Hit Pause
RBC’s chief economist Frances Donald noted that Canada’s economy, while still facing challenges, looks more stable than it did a few months ago. Back in March, things looked grim as the U.S. slapped 25% tariffs on Canadian imports. But those fears have since cooled off. Today, nearly 90% of Canadian exports to the U.S. remain duty-free, with the average tariff rate dropping to just 2.3%.
That’s a big reason why RBC believes the BoC will likely hold its current 2.75% rate, which has remained unchanged for two consecutive meetings. It also helps that the Canadian government is stepping in with fiscal tools, including tax deferrals, employment insurance programs, and even increased defence spending—all of which can support the economy more directly than interest rate cuts.
What Does This Mean for Mortgage Borrowers?
For those looking to buy a home or refinance, it’s important to understand that we might not see more drops in mortgage rates anytime soon. The BoC has already cut rates by 2.25 percentage points since the beginning of this easing cycle, and these effects are still working their way through the economy.
While many Canadians were hoping for further cuts—especially amid sticky inflation and higher living costs—core inflation in April was hotter than expected, which made central bankers uneasy. This could be a signal to pump the brakes on additional reductions.
Still, RBC is cautiously optimistic. They upgraded their forecast for U.S. GDP growth to 2.5% and for Canada’s to 1.3% in 2026. A stronger U.S. outlook often boosts Canada’s prospects too, given how closely our economies are linked.
What Do Other Banks Think?
Not everyone agrees with RBC. Other members of the Big Six banks, including BMO, still predict the overnight rate could drop to 2.25% or even 2.0% by 2026. But former Bank of Canada governor Stephen Poloz recently urged caution. He reminded markets that during the post-COVID era, inflation surprised policymakers—and no one wants a repeat of that scenario.
Bottom Line for Home Buyers
If you’re planning to enter the housing market or renew your mortgage, it’s a good time to stay informed. With rates expected to stabilize, fixed-rate mortgages might become more attractive again. And if you’re still unsure about your next steps, feel free to reach out to Pankaj Aggarwal—one of Canada’s top 1% mortgage brokers, offering access to 75+ lenders and personalized advice to help you make the right move.
