Mortgage professionals are reacting to the Bank of Canada's decision to hold steady its key interest rate at 2.75%, particularly amid ongoing trade discussions between Canada and the United States that continue to create economic uncertainty.

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Bank of Canada Holds Key Rate Steady

The Bank of Canada announced on Wednesday that it would maintain its key interest rate at 2.75%. This marks the third consecutive decision to hold the rate, primarily due to uncertainties surrounding tariffs and trade negotiations with the United States.

According to mortgage industry experts, this decision represents what True North Mortgage calls a "neutral hold" as the central bank weighs between leaning hawkish (restrictive rate agenda) or dovish (supportive rate agenda) until more is known about a potential U.S. trade agreement and its economic impacts on Canada.

"Stability is beneficial for business confidence, stock markets, and the housing sector. This decision may encourage individuals who were previously hesitant to enter the market to now consider buying or upgrading their homes," notes a local real estate professional.

Economists had predicted that the central bank would refrain from cutting interest rates this month, with all 28 analysts polled by Reuters expecting a hold at the July 30 rate decision, citing ongoing price pressures in the Canadian economy.

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Housing Market Remains "Frozen" Despite Rate Stability

Despite expectations that lower interest rates would stimulate housing activity, mortgage experts suggest the market would likely remain "frozen" even with rate cuts. The primary issue appears to be confidence rather than interest rates themselves.

"With looming tariffs and a lot of uncertainty in the market, with potential job losses and rising costs in many aspects of life, I think a lot of people are just really scared to take on a lot of debt," said Victor Tran, a Toronto-based mortgage broker and Ratesdotca mortgage and real estate expert.

CIBC economist Benjamin Tal emphasizes that "confidence is the main issue, not interest rates," arguing that economic uncertainty driven by weak investment, slowing consumer demand, and unresolved trade tensions is keeping the market paralyzed.

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Strong Fundamentals Underpinning the Housing Market

"The factors that drive the housing market remain strong," notes a real estate agent with Coldwell Banker Horizon Realty. "Employment rates are stable, and even saw a slight increase last month. Inflation is under control, and savings rates are high. Business confidence has also shown a slight improvement from recent lows caused by tariff concerns. The primary challenge is uncertainty, not fundamental issues related to affordability, employment, or borrowing costs."

Current economic indicators support this assessment:

• Unemployment rate dropped to 6.9% in June from 7.0% in May
• Total employment reached 21.061 million, up from 20.978 million
• June labour market showed unexpected gain of 83,000 jobs, mainly from summer part-time hires
• Average wage growth remains at 3.2% in May, down from 3.4% the previous month

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Impact on Mortgages

While the Bank of Canada doesn't directly set mortgage rates, its decisions significantly influence lending costs. Changes to the policy interest rate typically lead to corresponding changes in short-term interest rates, including the prime rate banks use to determine variable-rate mortgages.

Variable-Rate Mortgages: With the interest rate remaining unchanged, Canadians with variable-rate mortgages can expect their payments to stay consistent, with most bank prime rates holding at 4.95%.

Fixed-Rate Mortgages: Those with fixed-rate mortgages will likely see no immediate change in their payments. However, new borrowers face continued pressure as fixed rates remain elevated due to bond market volatility.

Industry experts suggest that fixed rates, particularly the popular five-year fixed rate, might see a decrease of 10 to 20 basis points by year-end. However, significant movement in variable rates is unlikely unless there are changes to the bank rate.

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Market Predictions and Expert Guidance

Early predictions from major banks suggest rates could decrease by as much as 75 basis points in 2025, though this remains contingent on trade resolution and economic stability.

One mortgage expert anticipates a potential improvement of around 50 basis points (half a percentage point) by year-end, contingent on greater certainty in trade relations with the United States. Continued uncertainty could lead the Bank of Canada to maintain its current stance.

"It is important to act now to secure access to today's interest rate environment, whether you are renewing your mortgage or buying your first home," a mortgage specialist advises. "Variable mortgage rates are expected to remain stable in the near future. However, fixed mortgage rates are facing upward pressure due to elevated bond yields in recent months."

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Buyers Exercise Extreme Caution

Those few buyers currently active in the market tend to be extremely cautious. Robert Saunders, co-founder of Ownright, a digital real estate legal services startup, observes: "What we're seeing from a first-time homebuyer point of view is generally, people are doing a lot more due diligence and bargaining more on the deals that they're doing."

First-time homebuyers particularly "don't want to catch a falling knife," given that prices in some markets have dropped considerably. In Toronto's condo market specifically, there's concern that "by the time they take possession, the value can be less than what they bought it for".

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Critical Advice for Mortgage Renewals

For Canadians facing mortgage renewals, mortgage broker Ron Butler emphasizes that borrowers "simply must shop" around. He notes that major lenders waged a "mortgage rate war" in early spring but are far less aggressive on renewals.

"If you can't be bothered, you're just accepting the fact you're probably going to pay somewhere between $1,500 and $5,000 more over the course of your renewal period," Butler warns.

Key renewal strategies include:

• Start early: Most lenders will hold a rate for up to 120 days
• Consult multiple professionals: Work with mortgage brokers and specialists from different institutions
• Lock in rates: Secure current rates with the option to benefit if rates decline
• Don't wait: Process timing is crucial given current market volatility

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Recovery Outlook for Real Estate Investment

With interest rates stable for the third consecutive month, real estate professionals anticipate a recovery in real estate investment, particularly for shareholders in Real Estate Investment Trusts (REITs).

"Real estate investors experienced challenges due to the post-pandemic rise in inflation and the subsequent increase in interest rates aimed at combating inflation," explains one industry expert. "Now that interest rates are returning to more normal levels and inflation is under control, we are seeing a gradual recovery in the investment market. We expect this trend of slow and steady improvement to continue, mirroring the overall housing market."

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Market Outlook

Despite current challenges, there are signs of underlying strength. Strong buyer demand persists in the housing market, though renewed tariff concerns could dampen consumer confidence and slow market activity.

"If current trends continue, we anticipate a continued return of demand to the market," notes one mortgage specialist. "There is significant pent-up demand from late 2024, when many homebuyers delayed purchases due to high interest rates. The expectation is that the current year will be more active for real estate."

The next Bank of Canada rate decision is scheduled for September 17, 2025, with market participants closely watching for signals about future policy direction as trade negotiations continue and economic data evolves.