Mortgage & Wealth Strategies

BoC Rate Cuts Ahead? What Canada’s Cooling Inflation Tells Us

June 30, 2025 | Posted by: Matt Broom-Hall

As summer heats up, the Canadian mortgage market is moving into a quieter—but no less strategic—phase. With Canada grooving into another hot July (and Happy Canada Day to you!), the attention now shifts to what’s beneath the surface: bond yields, inflation trends, and the path forward for rates. If you’ve been waiting for a signal to lock in your mortgage—or ride the variable wave—now’s the time to tune in.

Let’s break down what’s just happened and what it means for your next move.

Inflation Cools, But Rates Hold (For Now)
Canada’s core inflation drifted lower in May, and GDP slipped by 0.1% in both April and May. That’s two straight months of economic contraction—a signal that the Bank of Canada can’t ignore much longer. While lenders haven’t responded with big changes just yet, fixed mortgage rates are now below their long-term average again, and that’s giving borrowers some room to breathe.

The bond market is still calling for at least two more quarter-point rate cuts from the BoC by the end of 2025. Right now, though, the consensus is that the next cut won’t come at the Bank’s July 30 meeting. That means variable-rate holders need to hang tight a little longer, while fixed-rate hopefuls have a unique window to capitalize on currently level pricing between three- and five-year terms.

If you’ve been watching five-year fixed rates, you might have noticed they’re starting to look like better value, especially as longer-term pricing premiums slowly reappear. But the real story is on the variable side. For borrowers who can stomach a little rate volatility and don’t mind a temporary premium up front, today’s variable rates may still end up being the lowest-cost option over the full term. We’re not quite in stimulative territory yet—but we’re inching closer.

And in case you’re wondering when rates will start pushing below neutral again, history gives us some clues: the BoC has dropped its key rate to 2.00% or below in each of its last five cut cycles. With the current rate at 2.75%, we may still have a ways to go.

What Does This Mean for You?
For buyers: This is your planning window. Fixed rates are stable, and variable rates—though still at a premium—are expected to drop. But don’t wait for “perfect”—get your pre-approval lined up now, especially if you’re targeting a purchase later this summer or early fall. With economic data worsening, opportunities may open sooner than expected.

For homeowners: If you're up for renewal, consider this: five-year fixed and three-year fixed rates are currently about the same. Unless you have specific timing goals, the five-year term may give you better value and peace of mind. But if flexibility is key, a variable could still be your long-term low-cost champ—as long as you’re financially buffered for short-term bumps.

For sellers: Cooling inflation and a possible rate cut in late summer could push more buyers back into the game. Make sure your property is priced right and well-presented—buyers are cautious and selective right now.

Tip of the Week:
Your mortgage isn’t just about the rate—it’s about the contract. The difference in penalties between lenders can add up to thousands. Before locking in, get a full breakdown of exit costs and prepayment terms. Flexibility today means freedom tomorrow.

Here’s to a stable summer market and savvy mortgage moves!

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