The Bank of Canada’s September rate cut — the first since 2024 — is already shaking up the mortgage world. With the policy rate now sitting at 2.50%, lenders are racing to adjust fixed and variable offerings ahead of what could be another two cuts before year-end.
Variable vs. Fixed: The Shift Begins
Variable-rate holders, who’ve been hammered for two years, are finally breathing. Most major banks passed along the full 25-basis-point reduction, bringing prime down to 4.70%. That translates to roughly $14–$20 less per $100,000 borrowed on monthly payments.
Fixed rates, meanwhile, have been trending lower since mid-summer as bond yields collapsed. The 5-year GoC yield has dipped below 2.7%, pushing many insured fixed offers into the 4.4–4.6% range.
What Borrowers Are Doing
Renewers are locking shorter. Data from Ratehub shows a spike in 1- and 2-year fixed term selections, as Canadians bet on further cuts. Variable uptake is up too — about 20% of new mortgage applications are now variable, compared to just 7% six months ago.
For first-time buyers, this is oxygen. Qualifying rates under the stress test (currently 2% above contract) are finally falling, letting some buyers re-enter the market.
The Wild Card: Inflation
The BoC’s comfort zone is a 2% target — and inflation isn’t quite there yet. Core metrics are stuck near 3%. If inflation bounces, mortgage relief could stall quickly.
Why It Matters
Mortgage affordability is the most visible way Canadians feel monetary policy. Rate cuts lower payments, but also reheat housing. The BoC knows that, which is why Governor Tiff Macklem is trying to cut just enough to prevent a credit squeeze — without re-sparking a price surge.
The Takeaway
This first cut is the turning point. If inflation keeps cooling, fixed rates could fall another half point by early 2026. But for now, borrowers should enjoy the small wins — and be ready to move fast if the next two cuts actually land.
Marc has been involved in the Stock Market Media Industry for the last +5 years. After obtaining a college degree in engineering in France, he moved to Canada, where he created Money,eh?, a personal finance website.
