What the Bank of Canada’s Rate Cut Means for Your Mortgage Renewal

On September 17, the Bank of Canada lowered its key overnight rate by 25 basis points, bringing it down from 2.75% to 2.5%. This marks the first cut since March and it’s good news for homeowners — especially those facing a mortgage renewal in the coming months.

Why this matters

Commercial lenders adjust their rates based on the Bank of Canada’s benchmark. With this move, many lenders have already reduced their variable mortgage rates by up to 30 basis points, with some offerings now sitting well below 4%.

Meanwhile, fixed mortgage rates, which follow bond market trends, also remain competitive — with several options available under 4%.

Should you wait for more cuts?

Some Canadians may wonder if it’s better to wait until later this year for another potential rate drop. The smarter move is often to secure a rate hold now. Most lenders allow you to lock in a rate for up to 120 days, which means you can take advantage of today’s lower rates — and still benefit if they fall further before you renew.

Choosing between fixed and variable

• Fixed rates: Provide predictability and stability for those planning to stay put for the next 3–5 years or longer.

• Variable rates: Attractive right now for their affordability and flexibility, especially if you think you may move in the next few years (since penalties to break are usually lower).

Don't just sign the renewal letter

According to recent surveys, nearly 70% of Canadians renew with their existing lender without shopping around. This loyalty can be costly: on average, homeowners who stick with their lender end up paying about $155 more per month — or roughly $9,300 over five years.

The good news? In late 2024, Canada’s banking regulator made it easier to switch lenders at renewal. If your balance and amortization stay the same, you no longer need to re-qualify under the stress test, giving you more freedom to find the best deal.

Bottom Line

With the Bank of Canada’s latest rate cut, Canadians renewing their mortgages have a valuable opportunity to lower costs. The right choice — fixed or variable — depends on your personal plans and comfort with risk. What matters most is starting the process early, exploring your options, and not settling for the first offer that lands in your inbox.

Source: Global News