Bank of Canada Rate Decrease 2025-10-29

The Bank of Canada announced a rate decrease of 25 basis points today (-0.25%).

Here’s how it affects you depending on your mortgage type:

If you have a VARIABLE-RATE mortgage

Your rate will decrease, which means your payment or how much goes toward principal will improve (depending on your lender’s structure).

·      If your payments are static, you’ll now see more money going toward the principal instead of interest.

·      If your payments adjust, you’ll see a small reduction on your next scheduled payment.

This is great news — but it’s also a good time to review your overall plan. We can look at whether locking in or riding out the variable still makes the most sense for you.

If you have a FIXED-RATE mortgage

Your rate won’t change immediately — but today’s announcement still matters.

Fixed mortgage rates are not directly tied to the Bank of Canada’s overnight rate. Instead, they move with Canadian bond yields, especially the 5-year Government of Canada bond.

Bond yields reflect market expectations for inflation and future rate changes. As you’ll see in the chart below, yields have been trending downward, which often leads to lower fixed mortgage rates.

5-year historical bond yield (showing the overall trend)

TD’s forecast for interest rates through 2026–2027

The overnight target rate is the interest rate the Bank of Canada sets for lending between major banks — it’s the benchmark that influences all other borrowing costs in the economy, including variable mortgage rates and lines of credit.

The 5-year Government of Canada bond yield represents the return investors demand to lend money to the government for five years, and it’s the main benchmark that lenders use to set fixed mortgage rates.

If you’d like to review how this change could affect your renewal strategy, refinance, or upcoming purchase, let’s schedule a quick chat this week.

Money is a tool, use wisely

Juliana