Bank of Canada leaves rates unchanged at July meeting
The overnight rate remains at 2.75% due to the ongoing trade war Trump has embroiled us in. While the Canadian economy has held up reasonably well, tariffs are starting to bite, with core inflation higher than desired along with s slowing economy. Rates are a double edged sword in this scenario, so it isn’t surprising that rate moves are paused.
Another report from the Bank lays out several scenarios concerning our economy, clearly showing us just how precarious a situation we find ourselves in. Here’s the overview of the report:
US tariffs are significantly higher than they were at the start of 2025, and US trade policy remains unpredictable. Inflation is near 2%, although underlying price pressures have picked up. With uncertainty about US trade policy still high, the outlook for the Canadian economy remains clouded.
The global trade conflict continues to evolve. Since the time of the April Report, extreme trade tensions between the United States and China have receded. The US administration has reached agreements on tariffs with some countries, which have raised US tariffs significantly from January levels. The United States has also doubled its tariffs on imports of steel and aluminum and has threatened high, broad-based tariffs on many other trading partners if agreements are not reached soon.
The lowest available August 2025 rates are:
-
1-year fixed insured 4.69%
-
2-year fixed insured 4.19%
-
3-year fixed insured 3.79%
-
4-year fixed insured 4.24%
-
5-year fixed insured 3.84%
-
5-year variable insured 3.90%
Is the mortgage stress test still a thing in 2025? Yes it is, and with the higher rates we’ve seen, it’s even harder to qualify for a mortgage. The rules require you to qualify at either 2% above the rate your lender is offering you or 5.25%, whichever is higher.
Being forced to qualify at the higher stress test rate causes the principal portion of your monthly mortgage payment to shrink, lowering the maximum amount you’ll be allowed to borrow for your mortgage. But the rate you’ll actually pay once you buy is the rate you are offered by your lender. Your monthly payments will be calculated from this lower rate, not the stress test rate. As a result your monthly mortgage bill will be smaller too.
The stress test has been quite unpopular so the federal government has rolled out several new changes to make it easier to buy a home. They are now offering a first time buyer’s credit of $5000, and an increase in withdrawals from your RRSP to $35,000.
In addition existing borrowers are no longer required to re-qualify at the stress test rate when they renew or refinance their mortgages. This will allow borrowers some flexibility if they want to choose a different lender as they are no longer under the pressure of qualifying at an additional two percentage points.
If you’re looking for mortgage info or help please reach out.
