Today, September 17th, 2025, the Bank of Canada (BoC) announced a decrease to the key lending rate by 0.25%, bringing the policy interest rate down to 2.50%.
Why did the Bank of Canada reduce its lending rate?
“The cut announced today by the Bank of Canada was largely expected by markets, and it resumes the cutting cycle following three consecutive holds. With GDP contracting and inflation somewhat muted, this will ease adjustable rate mortgages with a drop in the prime lending rate.”
– Bruno Valko, Vice President, National Sales
The Impact to Lenders and Homeowners
When the Bank of Canada lowers its key lending rate, banks and other financial institutions typically follow suit by lowering their own prime rates. That’s because the BoC’s rate influences the cost of funds for lenders – so when it drops, it becomes less expensive for them to lend money.
As a result, borrowing becomes cheaper for Canadians. Lower prime rates can mean reduced interest costs on mortgages, car loans, lines of credit and more.
For homeowners with an adjustable-rate mortgage, that usually translates into smaller monthly payments, freeing up money for other goals or debt repayment. If you have a fixed-rate mortgage, your payments won’t change, since your rate is locked in for the length of your term.
Want to see how a rate change could affect your mortgage? Try our Mortgage Payment Calculator.
If you’re looking to buy a home, the recent trend towards lower rates might make adjustable-rate mortgages more appealing. And one of the great features of an RMG Mortgages adjustable-rate mortgage is that you can switch to a fixed rate at any time – without penalty – if the market or your needs shift.
What’s Next?
The next Bank of Canada policy rate announcement is scheduled for October 29, 2025. While it’s always tricky to predict where rates will go next, many economists expect only modest cuts throughout the rest of 2025. That said, future decisions will depend on a range of factors – such as inflation, economic growth and the employment rate – all of which can shift quickly in response to global and domestic conditions.
Staying up to date on rate changes can help existing and prospective homeowners make informed decisions.
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