What to expect from Wednesday's Bank of Canada interest rate update

Another Bank of Canada (BoC) interest rate announcement is coming this week, and it may be promising for Canadians.

Canada’s central bank held its key interest rate at 2.75 per cent for the third time this year in July amid “threats of new sectoral tariffs” and “unpredictable” U.S. trade actions.

The Bank of Canada has made two 0.25 per cent cuts to its key interest rate so far this year, with the last one on March 12.

Experts are predicting that the next rate cut may be coming in the crown corporation’s interest rate reveal on Wednesday, Sept. 17.

Ratehub.ca mortgage expert Penelope Graham says that weaker job data in Canada and the U.S. may give the Bank a compelling reason to deliver a 0.25-point rate cut this week.

“Evidence is mounting that tariffs are whittling economic strength, and that some stimulus will be needed in the short term,” she explains. “The growing likelihood of a similar cut from the U.S. Federal Reserve also provides the BoC breathing room to lower rates without pressuring the loonie.”

Graham adds that the Bank of Canada also needs to consider a new set of inflation data, which is due the day before the interest rate announcement.

“Should there be further progress in the headline number – and any softening among the core metrics – that will further seal the deal for a cut,” she says.

“The door is certainly open to at least one more cut in 2025, should the economic data show further signs of weakness. However, given core inflation metrics remain elevated, the Bank won’t be keen to pass along too much stimulus too soon.”

How the Bank of Canada rate announcement could affect mortgages and housing

Graham says the mounting pressure on the U.S. Federal Reserve to cut rates has caused bond yields to drop, including in Canada.

“The Government of Canada five-year yield is now in the 2.7 per cent range for the first time since May,” she explained. “This has put downward pressure on fixed mortgage rates, with the lowest five-year term in Canada back below the four per cent threshold.”

The mortgage expert advises borrowers not to wait for the Bank of Canada to lower the interest rate further before they choose a mortgage.

“While variable rates may trend lower, lenders could reduce their spreads to the Prime rate in the coming weeks, which would reduce savings,” says Graham. “As well, a rate hold will guarantee access to the lowest fixed mortgage rate for an extended period.”

She adds that both fixed and variable mortgage rates could see decreases in the coming weeks.

If you’re deciding between the two, Graham says it comes down to risk tolerance — variable rates could help you save more this year.

According to Ratehub.ca’s mortgage payment calculator, a homeowner who put a 10 per cent down payment on a $672,784 home with a five-year variable rate of 3.95 per cent amortized over 25 years (total mortgage amount of $624,277) has a monthly mortgage payment of $3,267.

If the Bank of Canada announces a 25-basis point rate decrease, their variable mortgage rate will decrease to 3.70 per cent, and their monthly payment will decrease to $3,183.

This means that the homeowner will pay $84 less per month or $1,008 less per year on their mortgage payments.

However, Graham notes that there are still economic factors that could hike inflation, which could prompt the BoC to reverse course.

“The combination of lower mortgage rates and soft buying market means real estate buyers are enjoying some of the best affordability conditions in some time; home prices continue to stagnate, and the market is well supplied with inventory,” she explains. “Further rate cuts could spark an uptick in sales activity – and competition – in the coming months.”

Those keen on staying on the pulse of the market should follow the BoC’s X account and look at morning updates on the following dates:

• Wednesday, Sept. 17, 2025 (rate update only)
• Wednesday, Oct. 29, 2025 (rate update, monetary policy report, and commentary)
• Wednesday, Dec. 10, 2025 (rate update only)

All announcements typically drop at 9:45 a.m. ET (6:45 a.m. PT). You can also subscribe to Bank of Canada email alerts online.

Keep up with what experts think about Canadian markets and upcoming interest rate updates on Daily Hive.