Bank of Canada Holds Interest Rate at 2.25% — What It Means for Homebuyers

The Bank of Canada keeps its key rate at 2.25% for the second consecutive hold. Here's what this means for variable and fixed-rate mortgage holders, and buyers looking to enter the market.

## The Decision The Bank of Canada announced that it's keeping its key interest rate unchanged at **2.25%**, marking the second consecutive hold after a series of cuts throughout 2025. Governor Tiff Macklem and the Governing Council determined the current rate is appropriate given the economic outlook, though they emphasized that "heightened uncertainty" makes it difficult to predict what comes next. The Bank Rate sits at **2.5%** and the deposit rate at **2.20%**. ## Why Hold Steady? **Inflation is on target.** Core inflation has cooled from 3% in October to around 2.5% in December. The Bank expects inflation to stay close to its 2% target going forward. **The economy is adjusting.** Canada continues to adapt to U.S. tariffs and shifting global trade conditions.

Growth is expected to be modest — **1.1% in 2026** and **1.5% in 2027**. **Trade uncertainty looms large.** The upcoming review of the Canada-U.S.-Mexico Agreement (CUSMA) is a major wildcard. Until there's more clarity on trade relations, the Bank is taking a wait-and-see approach. ## What About the December Inflation Bump? CPI inflation rose to 2.4% in December, but the Bank noted this was largely due to **base-year effects** from last winter's GST/HST holiday. When you strip out tax changes, inflation has actually been slowing since September. ## What's Next? Most economists expect the Bank of Canada to stay on the sidelines through much of 2026. The **next rate announcement is scheduled for March 18, 2026**.

Macklem made clear that if conditions change, the Bank is ready to act — in either direction. For now, stability is the name of the game as Canada navigates an uncertain trade environment. ## What This Means for Ontario Homebuyers - **Variable-rate mortgage holders:** Your payments stay the same for now — no surprises. - **Fixed-rate mortgage holders:** This hold gives you more predictability as you plan ahead. - **Prospective buyers:** Rates are expected to remain relatively stable in the near term, making it a good window to explore your options without the pressure of rapidly shifting borrowing costs. > The key takeaway? Stability in rates means stability in your planning. If you've been on the fence about entering the market, this predictable rate environment gives you breathing room to make a well-informed decision. If you have questions about how the current rate environment affects your buying power or mortgage options, our team is here to help you navigate the numbers.

Published by Circle Real Estate Brokerage — Toronto & GTA pre-construction and resale experts.