Canada’s top banks dropped prime rates after the Bank of Canada reduced rates for the first time since March
Canada’s largest banks have moved swiftly to lower their prime lending rates by 25 basis points, following the Bank of Canada’s recent decision to cut its overnight rate. Effective September 18, 2025, RBC Royal Bank, TD Canada Trust, and CIBC have all dropped their prime rates from 4.95% to 4.70%.
Scotiabank and BMO have also confirmed implementing the same decrease.
The coordinated move comes as no surprise to industry insiders, who have been closely watching for signs of relief for borrowers after a prolonged period of elevated rates.
The BoC’s rate cut, its first since March, brought the benchmark rate to 2.5%—a full 250 basis points lower than 18 months ago. The central bank cited easing inflation and a cooling housing market as key drivers. But the tone from policymakers remained cautious.
Doug Porter, chief economist at BMO, described the central bank’s messaging as “incredibly careful,” with no promises of further cuts. “They kept [mentioning] their short-term focus,” Porter told Canadian Mortgage Professional.
“To me, that means they’re basically going to react to how the data and events unfold in the next six weeks.” He predicted the Bank would likely hold rates in October, with possible cuts resuming in December and March, but emphasized that “the Bank certainly did nothing to quash the possibility of further cuts. It’s just they didn’t exactly encourage them either.”
For mortgage holders, the immediate financial impact is modest. According to Ratehub.ca, a typical homeowner with a $624,277 mortgage will save just $84 per month.
“This rate cut is more about psychology than math. Even a small drop can give hesitant buyers and sellers confidence that the market is stabilizing after years of uncertainty,” Joel Fox, COO at Ownright, said. “We’re already seeing activity pick up, but prices remain well below their 2022 highs—and that gap will take time to close.”
Penelope Graham, mortgage expert at Ratehub.ca, noted that the cut could entice more buyers off the sidelines.
“Many have stayed benched due to a combination of economic uncertainty, and steep borrowing costs. Now that both have eased slightly—and the fact that plenty of inventory has kept home prices from reheating—buyers may feel now is the time to take advantage of today’s attractive affordability conditions,” Graham said.
