Bank of Canada Holds Interest Rate at 2.75% Impacting Mortgage Affordability

Mortgage rates in 2025 remain elevated, hovering between 6.5% and 7%, largely due to economic uncertainties including lingering inflation, trade tensions, and tariffs imposed by President Trump's administration. The Bank of Canada has held its key interest rate steady at 2.75%, complicating mortgage planning for homeowners and prospective buyers, while Ottawa's proposed GST rebate for first-time homebuyers faces criticism for limited impact. Despite a slight recent dip in mortgage rates, homebuyer demand has not surged, with a notable increase in cancelled purchase contracts suggesting buyer caution amid high rates. Experts suggest that high mortgage rates present an opportunity for prospective buyers to pause and save in high-yield accounts until borrowing conditions improve. The uncertainty caused by ongoing tariff disputes has contributed to market instability, preventing significant declines in mortgage rates and exacerbating housing affordability challenges. The Federal Reserve's wait-and-see approach to rate cuts and potential easing depends on factors such as tariff policies and labor market developments, leaving mortgage rates likely to remain high for the near future.