The Bank of Canada’s rate hold on Wednesday will have marginal effect on mortgages and real estate, says Penelope Graham of Rate.hub.ca
“The bank of has indicated it’s on standby, as it monitors how the conflict in the Middle East impacts Canadian growth and inflation,” says Graham.
“The latter is of particular focus, as the bank anticipates that inflation risks will increase in the near future, in tandem with higher energy prices. Overall, policymakers have indicated that it’s ‘too early’ to respond to this new geopolitical pressure, but the possibility of rate hikes is very much back on the table, along with the risk of Canadian stagflation, as jobs and GDP data continue to sag.”
No movement on variable rate mortgage
“While a prolonged rate hold means zero relief for home shoppers holding out for lower rates, those who already have floating-rate mortgages will continue to benefit from continued stability,” says Graham. “Depending on the type of variable-rate mortgage you have, neither your monthly payment, nor the portion of that payment that services interest, will change."
“And today’s variable-rate pricing isn’t terrible news for those currently weighing their rate options, either. Variable-rate pricing, currently at a low of 3.35%, remains the lowest it has been since the summer of 2022. This follows nine cumulative rate cuts from the bank between June 2024 and October 2025.”
“Overall, the benchmark for variable rates has decreased 275 basis points from its peak of 5%, where it had remained throughout 2023 and the first half of 2024.”
Fixed rate mortgages have increased
“Fixed mortgage rates, while not directly impacted by the bank’s rate decisions, are nevertheless feeling upward pressure, as it becomes less likely that both the Canadian and American central banks will lower rates in the near future,” says Graham. “As the US 10-year treasury has broached the 4.2% range, and the Government of Canada five-year yield has crept over 3% this week, lenders hiked their fixed mortgage rates.”
“The best insured five-year fixed is now 3.94%, compared to 3.79% in February, an increase of 15 basis over just a few weeks.”
Housing favours buyers; markets are slow
“The most recent February data from the Canadian Real Estate Association shows home prices continue to soften, further improving affordability for home buyers,” says Graham. “While the same macro pressures, such as fear of job loss and tariff pressures, that impacted buyer demand last year are still present, there are plenty of pent-up first-time buyers who’ve been waiting for a price or interest rate bottom to get into the market.”
“Today’s cooler pricing and competitive mortgage rates could offer the incentive for many to finally come off the sidelines.”
Going forward in 2026
Doug Porter, chief economist at Bank of Montreal, told Canadian Mortgage Professional (CMP) the bank should consider a cut to its rate, even though he doesn’t think it’s likely.
“Unless the US-Iran conflict ends relatively soon and we get a deal on USMCA (the US-Mexico-Canada Agreement), which clears the way for trade, I just think the economic backdrop is so fraught for growth that it would be an error to raise interest rates,” said Porter.
Porter believes Canada’s physical separation from the Middle East provides some insulation from the conflict.
“Canada is a significant energy exporter,” says Porter. “Portions of the economy will actually do just fine through this, but the threat for central Canada, Atlantic Canada, and British Columbia is pretty serious.”
“I personally think that outweighs any benefits that oil-producing regions will see.”
Even though he thinks cutting the rate makes more sense, he believes a prolonged pause remains the bank’s most likely course of action.
“I think the bank’s word, ‘dilemma,’ is a good one,” he said. “I think that’s where we’re caught. It’s a tough situation for central banks. I think the reality is when you’re faced with such acute uncertainty, the best policy is to do nothing.”
“Our forecast is for no rate changes this year and I still think that’s a pretty reasonable call.”
