CALGARY — The Bank of Canada’s decision to hold its overnight interest rate didn’t surprise a majority of market watchers who say the move will have little effect on mortgage rates.
“The Bank of Canada’s decision to hold its overnight rate at 2.25% was widely expected and reflects the bank’s difficult position in balancing between tariff-driven inflationary pressures and the risk that a prolonged trade war will slow economic growth,” said Jamie David, vice-president of mortgages at Ratehub.ca,
“With the latest inflation data showing headline CPI at 3% and energy prices once again rising amid renewed conflict between the US and Iran, the bank has little room to move aggressively in either direction.”
It was the seventh rate hold in a row but that doesn't rule out changes, said David.
“Future rate cuts remain on the table. The bank has acknowledged that tariffs and higher energy and gasoline prices pose risks to inflation,” she said. “However, if the trade war begins to weaken consumer spending, business investment and employment, the bank may eventually need to cut to support growth amid economic pressure.”
David said fixed rate mortgages could move in either direction in the coming weeks.
“Much depends on how the trade war and conflict in Iran develop. A prolonged US-Canada trade conflict that weakens economic growth could push bond yields and fixed rates lower, while higher oil and energy prices and tariff-driven inflation could push them higher. Borrowers should expect continued volatility in fixed rates,” she said.
“There are currently still some discounted options available below the 4% mark, including a two-year fixed mortgage rate of 3.89% and three-year fixed rate of 3.94%. The lowest five-year fixed mortgage rate is currently sitting at 4.09%.”
For those shopping for a home or approaching a mortgage renewal, securing a rate hold is a strategic move amid the current market volatility.
“A rate hold can lock in today’s rates for up to 120 days, shielding borrowers from potential increases,” said David, adding variable mortgage rates will remain unchanged.
“But the outlook for future cuts is becoming more dependent on how the trade war unfolds. If tariffs begin to weigh heavily on economic growth, employment, and consumer demand, the bank could have more room to cut rates to support the economy,” she said.
The Canadian housing market, as a whole, has been showing signs of stabilizing. But the full effects of the Canada/US trade war have yet to be felt, with Canada adding new tariffs on September 8, which could put the recovery back on hold.
“Heightened economic uncertainty around employment, household incomes and mortgage rates may cause both buyers and sellers to take a wait-and-see approach,” said David. “The housing market needs confidence as much as it needs lower borrowing costs. If the trade war persists, weakening economic sentiment could weigh on sales activity even if mortgage rates remain relatively stable.”
“For buyers who are financially ready to move, waiting for significantly lower rates or home prices may not necessarily be the best strategy, as affordability is unlikely to improve meaningfully in the months ahead.”
Canadian Mortgage Trends (CMT) reports the bank’s decision “probably keeps potential homebuyers in a holding pattern with variable rates remaining where they are. Home equity line of credit rates will also stay unchanged, while the announcement doesn’t directly affect fixed rates, although they could face upward pressure in the coming weeks.”
“There’s still a lot of uncertainty around the economy, particularly with tariffs and inflation, so I don’t think they’re in a rush to make another big move right now,” Joel Fox, chief operating officer at Ownright told CMT adding he saw the rate hold by the bank as an inevitable move.
“Higher oil prices have put some upward pressure on inflation, but the bigger concern is that tariffs could put pressure on prices at the same time as they weigh on economic growth.”
He didn’t rule out a move by the bank to bring rates lower before the end of 2026 if the inflation outlook improves.
The bank will make two more rate announcements this year, on October 28 and December 9.
“I think they’ll want to see how growth and inflation develop over the next few months before making their next move,” he said. “If inflation keeps easing while the economy remains weak, I think we could see a rate cut later this year.
“For buyers, that means there’s no rush based on [the] decision. If rates come down later this year, buyers could actually see some relief in borrowing costs, so it’s worth keeping an eye on where inflation and the economy go from here.”