Bank of Canada leaves rates unchanged at April meeting
The overnight rate remains at 2.75% due to uncertainty here and throughout the global economy. The ongoing trade war the United States has unleashed on the world shows no signs of abating, with the US increasing tariffs on China to a whopping 245%. Talk of annexing Canada is also back.
With developments like this hitting the news daily it isn’t a surprise that rates were held firm. A move either way could easily be disastrous with such a mercurial administration running the world’s largest economy.
The Bank’s take is easy enough to decipher, they don’t know what the Americans are going to do either. Tariffs are inflationary which would warrant a hike, but the tariffs are already starting to impact our already weak and slowing economy. When the economy slows, the usual remedy is a cut.
Doing nothing is probably the right call. We need room to move rates either way and the race to the bottom a few years back was disastrous for inflation and the housing market. We need to be cautious, Canada is in the midst of a tectonic shift in the global order not seen since the fall of the USSR. Below are some excerpts from the Bank’s press release.
Governing Council will continue to assess the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs.Our focus will be on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval. This means we will support economic growth while ensuring that inflation remains well controlled.
Governing Council will proceed carefully, with particular attention to the risks and uncertainties facing the Canadian economy. These include: the extent to which higher tariffs reduce demand for Canadian exports; how much this spills over into business investment, employment and household spending; how much and how quickly cost increases are passed on to consumer prices; and how inflation expectations evolve.
Monetary policy cannot resolve trade uncertainty or offset the impacts of a trade war. What it can and must do is maintain price stability for Canadians.
The lowest available April 2025 rates are:
1-year fixed insured 4.79%
2-year fixed insured 3.94%
3-year fixed insured 3.74%
4-year fixed insured 4.19%
5-year fixed insured 3.64%
3-year variable insured 4.15%
5-year variable insured 3.89%
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.
