As 2025 comes to an end, many Canadians are keeping a close eye on interest rates — especially homeowners preparing for renewal and first-time buyers planning to enter the market. The Bank of Canada (BoC) recently announced that it is holding its key interest rate at 2.25%, a decision that signals cautious stability while the economy continues to adjust to slower consumer spending, rising household debt, and ongoing global uncertainties.
But what does this rate hold actually mean for your next mortgage in 2026? Will rates go up, stay flat, or finally begin to ease? And how should you plan your mortgage strategy in this uncertain environment?
Let’s break down what Canadians should know.
Why Did the Bank of Canada Leave Rates at 2.25%?
The central bank’s rate decisions are always tied to major economic indicators, and this time is no different. Several key factors contributed to the hold:
1. Stable But Stubborn Inflation
Inflation is cooling, but not fast enough for the Bank of Canada to begin lowering rates. Certain sectors like food, energy, and services continue to keep price levels higher than expected. The BoC wants to ensure inflation is consistently trending toward the 2% target before making major rate reductions.
2. Strong Job Numbers
While many industries are experiencing slower hiring, overall employment growth remains stable. A strong labour market creates upward pressure on wages, which can keep inflation higher for longer — another reason the bank is cautious about cutting rates too soon.
3. High Household Debt
Canadian households carry some of the highest debt levels in the world. Mortgage payments alone have risen significantly since the rate hikes of 2022–2024. Keeping the rate steady helps create predictability for borrowers and prevents additional financial stress.
4. Global Uncertainties
Trade tensions, U.S. inflation trends, and shifting global markets also influence Canada’s rate decisions. The Bank of Canada is waiting for clearer economic signals before making major moves.
All of these factors together support the decision to keep the key rate at 2.25% — at least for now.
Also read: Should You Use Home Equity to Consolidate Debt in 2026?
How This Rate Hold Affects Mortgage Rates Today?
The Bank of Canada’s policy rate influences all borrowing costs, including mortgages — but not all mortgage products respond the same way.
1. Variable Mortgage Rates
Variable mortgage rates are directly linked to the central bank’s key interest rate. Since the BoC has held the rate steady, variable mortgage rates will also remain stable for the time being. This is welcome news for borrowers who struggled with fluctuating payments during the recent rate hikes. However, because the Bank has not signalled major rate cuts, significant relief for variable-rate holders may not arrive until mid or late 2026.
2. Fixed Mortgage Rates
Fixed rates are tied to the bond market rather than the BoC rate. Recently, bond yields have remained volatile due to global uncertainties and economic data.
Despite the rate hold:
- Fixed rates are unlikely to drop quickly.
- Some lenders may offer small downward adjustments.
- Significant fixed-rate decreases will depend on long-term economic stability.
For Canadians planning their next mortgage, this means fixed rates may remain higher for longer.
What This Means for Your Next Mortgage in 2026?
If you’re planning to renew, refinance, or buy a home in 2026, here’s what to expect based on current trends:
1. Rate Cuts May Be Slower Than Expected
While many homeowners hoped for aggressive cuts in 2025–2026, the Bank of Canada remains cautious. Most economic forecasts now predict that:
- Small cuts may begin in late 2025 or early 2026
- Larger cuts are unlikely unless inflation cools faster than expected
This means 2026 mortgage rates may still sit slightly higher than the ultra-low pre-2020 levels many Canadians were accustomed to.
2. Renewals Could Be Costlier
If your mortgage is up for renewal in 2026, expect:
- Higher payments than your previous term
- More pressure to choose carefully between fixed and variable options
- A need to evaluate debt and cash flow more closely
Many Canadians are renewing at rates double what they paid in earlier terms — making informed decision-making more important than ever.
3. First-Time Buyers Need Strategic Planning
For first-time homebuyers, the rate hold offers stability, but pricing challenges remain:
- Higher borrowing costs continue to reduce affordability
- Stress test calculations remain strict
- Inventory shortages persist in many cities
However, a stable rate environment also means buyers can plan more confidently without fearing surprise hikes.
4. You’ll Need a Customized Strategy
The one-size-fits-all mortgage approach no longer works.
Given higher rates and rising living costs, Canadians in 2026 will need:
- A personalized mortgage plan
- Clear understanding of different terms and products
- Strategies to reduce interest over time
- Support with pre-approval and financial assessment
This is where working with an experienced mortgage professional becomes essential.
Fixed vs. Variable in 2026: What Should You Choose?
Choosing between fixed and variable rates in 2026 will depend heavily on your financial goals and risk tolerance.
Fixed Rates: Best for Stability
Choose a fixed rate if you:
- Prefer predictable payments
- Expect rates to remain higher for some time
- Want long-term budget stability
Variable Rates: Best for Flexibility
Choose a variable rate if you:
- Believe rates will fall in late 2026 or beyond
- Can handle short-term fluctuations
- Want lower penalties if you refinance later
The right choice will be different for every borrower — especially in a transitioning rate environment.
Should You Lock In Your Rate Now or Wait?
With the BoC holding rates and future cuts uncertain, many Canadians are wondering when to lock in.
Here’s a simple guideline:
- If affordability is tight → Lock in sooner for predictability
- If you’re flexible and can tolerate risk → Waiting may pay off
- If you’re buying soon → Get pre-approved early to protect yourself
A mortgage broker can help compare lenders, find competitive offers, and time your rate lock effectively.
Looking Ahead: What Canadians Should Expect in 2026
Based on current economic signals, here’s the general outlook:
- Rates will likely remain stable over the next few months
- Modest cuts may begin in 2026
- Housing activity may slowly recover
- Renewals will continue to strain household budgets
- Lenders may introduce more competitive products
Overall, 2026 will be a year of gradual adjustment, not dramatic changes.
Get Professional Guidance Before Making Your Next Move
Today’s mortgage landscape is complex — and navigating it alone can be costly. Whether you’re preparing for renewal, buying your first home, or planning a refinance, getting expert guidance can help you secure the right mortgage at the right time.
Get a FREE Consultation From Us
If you’re unsure how the Bank of Canada’s rate hold will affect your next mortgage, we’re here to help. Our team provides personalized advice, compares options from multiple lenders, and helps you choose a strategy that fits your budget and long-term goals.
Book a free consultation today and get clarity before entering the 2026 market.