With high unemployment in Canada and economic uncertainty spurred by U.S. President Donald Trump’s tariffs, the Bank of Canada cut the key lending rate by 25 basis points on Wednesday, bringing it down to 2.5 per cent. It’s a move that was widely expected by economists and mortgage lenders, as the country saw inflation data for August come in at 1.9 per cent year-over-year. It means, for the first time since March, borrowing money in Canada just got cheaper, which is welcome news for anyone with a variable mortgage, or those looking to renew. “We’ve been hoping that this will happen because we have some mortgages coming up for renewal in the next six months or so,” said Jatin Gaur, an Ottawa resident who owns seven properties. “We’re extrapolating what the next few months will be and then, that’s when we will really feel a difference. At this point not yet, but it’s a really good step.” Factoring in Wednesday’s rate cut, someone with a $500k variable rate mortgage over 25-years will save $68 per month with their rate dropping from 3.95 per cent to 3.70 per cent. As for fixed rates, some analysts say rates dipping below four per cent could incentivise people waiting on the sidelines to jump into the market. “The lowest five-year fixed rate available right now is at 3.94 per cent and whenever we see rates fall below that four per cent threshold, that’s a bit of a psychological barrier for a lot of borrowers and home buyers,” said mortgage expert with Ratehub.ca Penelope Graham. “That tends to spur real estate activity and get more people to jump into the market.” The CEO of Ottawa General Contractors, a company that specializes in home renovations, says Wednesday’s rate cut will be watched closely in the nation’s capital. “We find that people in Ottawa are typically sensitive to good news and bad news. When good news comes out, we’re noticing people are a little bit more comfortable making purchasing decisions and when bad news comes out, be it interest rates, or tariffs or whatever, people want to kind of take a wait and see approach,” said Feras Elsabbagh. “I grew up in Ottawa, so I know exactly what it’s like. We’re a little bit more wait and see. We don’t necessarily just jump into things. It’s understandable that when there is negative news, everybody wants to see how it will affect themselves or their colleagues or maybe even their job security.” Elsabbagh says a rate cut is good news for the team at Ottawa General Contractors, as people will be able to borrow money more easily. “Whether a home equity line of credit (HELOC) is now a little bit cheaper, whether now is a good time to re-finance their home and pull out a little bit of equity, this is typically how they finance their renovation projects,” he said. “We have definitely heard from people who said they want to wait and see what the announcement would be and we’re looking forward to meeting with them now to see if they’re optimistic and ready to move forward.” Others, however, don’t see the most recent rate cut as much of a reason for optimism, with Canada’s unemployment rate remaining stubbornly high at 7.1 per cent in August. “There are ‘middle class people’ that can’t feed themselves because they have to decide between mortgage, rent or food,” said one man in Ottawa who wished to remain anonymous. “It’s ridiculous. It shouldn’t be like that.” The Bank of Canada’s next rate decision is scheduled for Oct. 29.
