With BoC rates holding steady amid global uncertainty, now’s the time to rethink your finances: 7 key ways to reshape your money decisions

1. Glimmer of hope for first-time homebuyers

Since March 2022, the BoC’s policy rate peaked at 5.00%, but a series of reductions, including the last cut on March 12, 2025, means a gradual ease on the financial strain higher borrowing rates imposed on first-time homebuyers. Despite the rate hold in April, first-time homebuyers are still in a position of lower borrowing costs, which makes mortgages more affordable and helps to expand loan eligibility for renters looking to get into the property market.

For example, on a $500,000 variable-rate mortgage previously at 5.20%, monthly payments drop by approximately $77, totalling annual savings of over $924.

Unfortunately, in cities like Toronto and Vancouver, where average home prices still exceed $1 million, a $500,000 mortgage represents a smaller share of the typical first-time homebuyer purchase. Instead, first-time buyers in mid-sized markets like Ottawa or Halifax, NS, may see the biggest relative benefit from ongoing reduced mortgage rates.

Bottom Line: Lower borrowing costs can fuel confidence and encourage potential homebuyers to re-enter the real estate market, but pent-up demand could mean a surge of buyers entering the spring selling market and this could drive home prices even higher.

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2. Relief for variable-rate mortgage holders

Variable-rate mortgage holders should benefit almost immediately from the Bank of Canada rate drop, since the target rate directly influences the prime rate used by banks and mortgage lenders.

For instance, a $400,000 mortgage shifting from 5.20% to 4.95% reduces payments by approximately $61 per month, or $736 annually. Some lenders maintain fixed payments while allocating more toward principal repayment, helping reduce overall interest costs.

Bottom Line: Borrowers see either reduced payments or accelerated loan repayment, easing financial burdens.

3. Renewing mortgages still pose challenges

Despite the promise of still lower borrowing costs, Canadians renewing fixed-rate mortgages from earlier lows (~2% in 2020) will still need to adjust to higher rates. As of April 2025, fixed mortgage renewal rates range from 4.69% to 5.29%, depending on the lender, credit profile, and term. While still higher than the sub-2% rates of 2020, borrowers are seeing gradual easing. Homeowners should use calculators to budget for higher payments and compare fixed or variable mortgage options before committing to a mortgage renewal.

Bottom Line: Budgeting and proactive financial planning remain critical for mortgage renewers.

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4. Reduced costs for large purchases

Borrowers seeking personal loans, auto loans, or lines of credit tied to the prime rate will see cost reductions. A typical $30,000 car loan with a variable APR tied to prime now drops to 6.95% — previously 7.20% — saving borrowers $150 per year in interest.

Bottom Line: Cheaper financing could stimulate spending on big-ticket items, positively impacting economic activity.

5. Boost for businesses

Businesses benefit from easier access to lower-cost credit, aiding expansion efforts. Lower rates may also increase consumer spending, boosting demand for goods and services. Small businesses, which often rely on loans tied to prime, see reduced interest expenses, freeing resources for growth.

Bottom Line: Rate cuts promote business growth, potentially driving job creation and economic recovery.

6. More disposable income for Canadians

Reduced rates translate to lower debt-servicing costs for Canadians. Borrowers with outstanding variable loans or lines of credit tied to prime rates could see noticeable savings. For example, a $50,000 line of credit previously at 7.20% now drops to 6.95%, saving $125/year on interest. For borrowers with excellent credit looking for competitive unsecured loan rates, interest can drop even lower with some lenders offering 6.45%. While borrowers with fair to poor credit scores continue to pay more, the recent rate reductions means that aggressively comparison shopping can help to secure loans with rates as low as 8.00%.

Bottom Line: With more disposable income, Canadians can save, invest, or pay down debt faster.

7. Inflationary risks remain

Although inflation cooled to 2.7% in March 2025, lingering supply chain disruptions and energy price volatility mean inflation risks are far from gone. The BoC remains cautious and could reverse cuts if price pressures rise again. The BoC will closely monitor inflation metrics and adjust rates if needed.

Bottom Line: Canadians should stay vigilant about inflation’s potential impact on living costs.

Conclusion

With the BoC holding its target rate in April, the central bank has promised to continue its efforts to boost economic recovery, while monitoring ongoing global uncertainty. For those Canadians in a position to pay down debt or to secure debt at a lower rate, now is a good time to lock in lower rates.