Bank of Canada cuts policy rate by 25 bps to 2.25%

The Bank of Canada |(BoC) has lowered its key policy rate by 25 basis points this morning, October 29, 2025, to 2.25%. This rate cut was in line with expectations. This is the ninth reduction since the Bank of Canada began easing monetary policy.

The BoC policy rate, often called the overnight rate, is the interest rate the BoC charges major financial institutions for very short-term loans between banks. It's a key tool the BoC uses to control inflation and influence the overall cost of borrowing in the economy.

When the BoC changes the policy rate, mortgage lenders typically adjust their prime rate by the same amount, but it's not guaranteed; it's a business decision and not a legal requirement.

After the latest BoC rate cut, mortgage lenders' prime rate is expected to fall from 4.70% to 4.45% in the coming days.

Here's what the latest rate cut could mean for you and your mortgage:

1. Adjustable Rate Mortgages: If your mortgage is tied to prime, your payments will drop. Expect to pay approximately $15 less per month for every $100K of mortgage.
2. Static Variable Mortgages: Your payment will remain the same, but more of your mortgage payment goes toward principal instead of interest.
3. More Buying Power: Lower rates = bigger mortgage approval amounts with the same income.
4. HELOC’s & Lines of Credit: Your home equity line of credit or lines of credit with an interest rate tied to prime (like HELOCs) will see lower payments and reduced interest rates.
5. Fixed Rates Unchanged (for now): Fixed rates DO NOT CHANGE with Bank of Canada rate changes; however, rate cuts can signal a downward trend in fixed rates, which follow Canada bond yield returns.
6. Increased Market Activity: Cheaper borrowing often sparks more buying, selling, and refinancing opportunities.

The bottom line is that lower borrowing costs open up opportunities for homeowners and buyers alike.

"With ongoing weakness in the economy and inflation expected to remain close to the 2% target, Governing Council decided to cut the policy rate by 25 basis points. If inflation and economic activity evolve broadly in line with the October projection, Governing Council sees the current policy rate at about the right level to keep inflation close to 2% while helping the economy through this period of structural adjustment. If the outlook changes, we are prepared to respond. Governing Council will be assessing incoming data carefully relative to the Bank’s forecast."

Read the full release here.