Recessionary signals are mounting, and interest rates are still well above past lows.
After a high-rate era, a return to cheaper borrowing may be more than a stone's throw away.
The last time Canadian home buyers and owners saw record-low mortgage rates, a global pandemic threw Canada into a quick but deep recession, and emergency stimulus forced the Bank of Canada’s hand.
Now, with growth slipping and tariffs hitting trade sectors and consumers, some wonder if we could return to that rate floor. Economists aren’t convinced, suggesting it may require more than a shallow recession to get us there.
Here's what really has to crack — and what stands in the way.
Sparked by the U.S. subprime mortgage collapse, this crisis froze global credit, triggered a 7-month recession in Canada, and sent ripple effects through international markets for years.
As the pandemic spread, closures and restrictions quickly sent the economy into a steep decline, eventually propped up by stimulus measures.
Canada's economy already contracted during the second quarter of 2025, with GDP (Gross Domestic Product) declining at an annualized rate of -1.6%. All three months in the quarter logged a decrease, with April, May and June each contracting by 0.1% year-over-year.
(A technical recession is considered two quarters of contraction in a row, though not all economists agree with this definition.)
Contrast that negative print with +2.6% annualized growth at the end of last year and +2.0% at the start of this one, and it's clear that the trade war chaos is weighing on Canada's economy.
Could a prolonged recession emerge? Economists remain split — some expect meagre growth to return and stay sluggish through year-end, while others warn that continued higher tariffs and job losses could deepen the downturn.
Economic disruptors take time to show up in the data. This year's fresh trade war with the U.S. is ongoing and still being reflected in company spreadsheets and business results, with GDP readings lagging by two to three months.
As a slowdown increasingly becomes apparent, the Bank of Canada is likely already adjusting its potential rate path, while keeping a close eye on inflation (its primary focus in steering the economy).
Many Canadian economists, such as those from RBC, BMO, TD, and National Bank, and our own True North Founder and CEO, Dan Eisner, generally agree that the BoC is in a position to cut rates — but not all the way back to a rock-bottom 0.25% (at least, not yet).
Dan explains, "The trade disruption is certainly an unexpected blow this year, but for rates to head that far down, there also needs to be widespread consumer pullback along with core inflation that's lower than the BoC's target. Another rate cut or two is likely to support a demand upturn, perhaps enough to stave off a full-blown recession as companies adjust to new trade realities."
Interest rates will likely remain higher due to inflationary pressures from the very tariffs that are causing the economic cooling. Consumer demand barely eased in Q2, despite negative growth — though if it finally cools, inflation may also declibe, allowing for more rate cuts if the economy demands it.
One past recession is not like another possible (future) recession. This time, inflation risks are pushing harder against the weakening factors, complicating rate reductions.
Several conditions could keep mortgage rates higher than historic lows:
Here are some factors that could see Interest rates and mortgage rates revisit the floor:
An escalation of global conflict could add fuel — through higher oil prices and new supply-chain shocks — amplifying the drag from disrupted trade relationships.
And all of these factors would need to sufficiently overwhelm any government stimulus that might otherwise cushion the blow.
Annualized growth gives a sense of how the economy would expand over a full year if that quarter’s pace continued.
Even if rates don't crash to rock bottom, our friendly, highly trained brokers know how to find your lowest rate for your situation — in your preferred language.
A downturn is just that, and amid higher prices all around, Canadian homeowners are looking to save cash where they can. Your mortgage is a big piece of your budget, and we focus on helping you save the most for your situation.
That includes passing along a volume rate discount and finding other ways to knock down your mortgage payment — our clients often save an average of $3000 or more per term.
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Continually updated. Where rates may go now and later — and what’s driving them.
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