Bank of Canada Rate Outlook

The Bank of Canada's policy rate journey — from 0.25% during the pandemic, up to 5.00% by mid-2023, then steadily lower through 2024 and 2025 — has been the single biggest driver of GTA affordability. Understanding where the BoC is headed matters more than watching any individual listing.

Where we are

Headline inflation has spent most of 2025 inside the Bank's 1–3% target band, with the core measures the Bank prefers (CPI-trim and CPI-median) drifting toward the 2% midpoint. That gave the Governing Council room to bring the overnight rate materially below the 5.00% peak. Prime rate at the big banks moves in lockstep — every 25 bps cut reduces a $700,000 variable-rate mortgage payment by roughly $100/month.

What could shift the path

• A re-acceleration in shelter or services inflation would slow further cuts.
• US Federal Reserve policy — a wide CAD-USD rate gap pressures the loonie and, indirectly, imported inflation.
• Labour market softening would give the BoC cover to cut faster.

What it means for your mortgage

Variable-rate holders have already felt real relief. Fixed rates — priced off bond yields, not directly off the overnight rate — have come down more modestly, since bond markets priced in cuts well in advance. If you're renewing in the next 12 months, run the math on both options before locking in.

"Rates are a tool, not a forecast. Pick the mortgage that works if the Bank changes its mind."