What Does the Bank of Canada’s March Rate Cut Mean for Canadians?

Market-watchers react to the BoC’s decision to reduce the overnight rate on March 12 to 2.75% due to uncertainty stemming from U.S. trade policies.

By Josh Sherman | 3 minute read

The Bank of Canada’s overnight rate is one of the main tools policymakers use to try and control inflation (learn more).

Most market-watchers weren’t surprised when, last Wednesday, the Bank of Canada reduced the overnight rate by 25 basis points to 2.75%.

Canada’s long-stable trade relationship with the U.S. has been fraught since President Donald Trump’s administration moved into the White House and began “The Dumbest Trade War in History,” slapping massive tariffs on many Canadian imports. 

While an array of goods were exempted from tariffs until April 2, all of the swirling uncertainty fueled the speculation (well-founded, in hindsight), that Canada’s central bank would try to get ahead of any possible headwinds with a 25-basis-point cut.

In fact, that was just what 10 of the 17 market-watchers Wahi surveyed leading up to the announcement predicted. “I believe the Bank of Canada will aim to mitigate any potential downturn by continuing to lower the rate in March, and quite possibly in subsequent announcements,” Shawn Woof, senior vice president, sales, at Sotheby’s International Realty Canada, said in response to the survey.

Now that the BoC has pulled the trigger, what does it mean for homebuyers and borrowers?

In its rate cut announcement, the central bank harkened back to a simpler time: early January. That is, the time before Trump’s inauguration. “The Canadian economy entered 2025 in a solid position, with inflation close to the 2% target and robust GDP growth,” the bank mused (presumably while staring off wistfully into the distance).

Since those early January days, the landscape has changed, with the BoC suggesting Canadians can expect higher inflation ahead. “Heightened trade tensions and tariffs imposed by the United States will likely slow the pace of economic activity and increase inflationary pressures in Canada,” the statement continues.

Not everyone was convinced that the BoC needed to act yet. Moshe Lander — one of six market-watchers Wahi surveyed who had called for a hold — suggests that policymakers may have acted prematurely.

“If you start using up the arrows in your quiver now, what’s that going to leave you when or if tariffs actually do come into play and they start to have economic consequences?” Lander tells the Montreal Gazette. “It’s not like right after Trump makes the announcement, we see prices rise in Canada.”

That may be so, but Rob Mclister, a Canadian interest rate analyst and founder of MortgageLogic.news, doesn’t fault the BoC for taking preventative measures.

“I prefer the burning house analogy,” Mclister tells Wahi. “Generally, you’re better off arriving to a fire early because it’s a lot harder to put it out once the flames heat up. Same with over-inflation or under-inflation,” he continues. “The BoC has limited visibility into the future and is rightfully trying to counteract a downturn before it catches momentum.”

Asked how significant the latest cut is, Mclister estimates the extent to which some borrowers should benefit. “It’ll save most floating-rate borrowers over $240 a year, per $100,000 of mortgage or HELOC [home equity line of credit]”, he says.

Of the cut, Victor Tran, mortgage expert at rates.ca, tells Wahi, “Every bit helps in an expensive housing market.”

As for the impacts on the Canadian housing market at large, normally a rate cut would boost confidence — but these, of course, aren’t normal times. “Psychologically, rate cuts support real estate sentiment (but in this case, perhaps not as much as tariffs harm it),” Mclister adds.

“There may still be some hesitancy to enter the market given the current economic instability that caused the BoC to lower the overnight rate in the first place,” says Tran.