On June 4th, the Bank of Canada announced that it will hold its policy interest rate at 4.75%, delaying the anticipated rate cut until its next meeting in late July. While this decision might come as a disappointment to many Canadians, there’s more to the story, and it reveals why a variable-rate mortgage might still be your best bet moving forward.

Why the Bank Didn’t Cut Rates

This latest decision from the Bank of Canada is layered with economic complexity. On the one hand, unemployment is on the rise, and the Canadian economy continues to show signs of weakness, strong indicators that typically justify a rate cut. On the other hand, tariffs and other external pressures have caused core inflation (CPI) to remain higher than the Bank is comfortable with.

In fact, core CPI — the figure the Bank of Canada watches most closely — is too elevated to support a rate reduction just yet. Historically, the Bank has never cut rates when core inflation is this high.
But there’s a twist: this inflation isn’t caused by a strong labor market or wage growth, as post-COVID. In fact, unemployment is rising, and the labor market is soft, meaning the inflation we’re seeing is less likely to “stick.”

Tariffs and Inflation: A Mixed Signal

The current tariff environment is contributing to both inflation and GDP growth, but not in the way you might think. Recent GDP increases are likely temporary, driven by businesses trying to move goods before more tariffs take effect. This artificial boost shouldn’t distract from the broader reality: the Canadian economy is still sluggish.
In this context, the Bank of Canada is walking a tightrope. Cutting rates too early could erode public trust — especially after the post-COVID mistake of downplaying inflation as “transitory.” It seems the Bank is erring on the side of caution, waiting for more data before making its move.

What This Means for Mortgage Rates

If you’re a Canadian homeowner — or soon to be one — this pause in rate cuts raises an important question: Should you go fixed or variable?
At Cannect, we believe the answer is clear: Variable-rate mortgages still make sense. Here’s why:

• The Bank of Canada is expected to cut rates by 25 basis points in July.
• We anticipate a total of 75 basis points in rate cuts by the end of 2025.
• Variable rates will likely remain lower than fixed rates over the next 3 to 5 years.

While fixed rates have ticked up slightly since April (driven by rising Government of Canada bond yields), today’s announcement had only a minimal impact on fixed mortgage rates. The bond market seems to agree — the hold on rates now likely means lower rates for longer shortly.

The Takeaway: Stay the Course with Variable

The Bank of Canada’s cautious approach doesn’t change the long-term outlook. The weak labor market and rising unemployment suggest inflation won’t be sticky, and rate cuts are still on the horizon.
If you’re thinking about refinancing, buying a home, or simply trying to reduce your monthly payments, now might be the right time to consider a variable-rate mortgage. And we’re here to help you find the best fit for your financial goals.

Have Questions About Your Mortgage?

At Cannect, we make your money count. Refinancing, renewing, or buying your first home — our team delivers the smartest mortgage solution with the lowest rate and a strategy that works for you.

Let’s talk. Reach out today and let us help you make the most informed decision possible.