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On Wednesday, December 10th, at its regular policy meeting, the Bank of Canada (BoC) maintained its target for the overnight rate at 2.25 per cent. This is the first pause after 2 rate drops this fall, and with most banks and mortgage lenders, leaves the consumer prime rates at 4.45 per cent (4.6 per cent with TD Canada Trust).

Why did the Bank of Canada cut the policy rate?

The Bank of Canada’s mandate is to maintain price stability and promote the economic and financial welfare of Canada. This decision to keep the rate unchanged was driven by a few key factors:

  1. Inflation is Near Target: The Bank believes the current rate is sufficient to keep consumer price inflation (CPI) hovering near its 2% target.
  2. Economic Stabilization: Recent economic reports, including gauges on GDP and a slight tick down in unemployment, suggested the economy is performing largely as expected.
  3. Treading Cautiously: After reducing the policy rate four times so far this year, the BoC is taking a pause to assess the full impact of those cuts on inflation and the broader economy.

In short, the BoC is signaling that borrowing costs are currently positioned where they need to be, no more easing is necessary right now, but tightening isn’t warranted either.

What’s next for the policy rate?

In its press release explaining the decision to hold the policy rate constant, the BoC confirmed that uncertainty remains elevated and that it is prepared to respond if the economic outlook changes.

Some economists caution that ongoing global trade issues and tariffs may increase business costs, potentially leading to higher inflation. If this were to play out, the next policy rate move by the BoC could be a rate hike in the second half of 2026. On the other hand, those same trade and tariff issues could bring more layoffs and send our unemployment rate back up, which would lead to less consumer spending and lower inflation.

While the exact forecast is uncertain (as it always is), the general consensus now is that we’re close to the bottom of this current interest rate cycle and that we will likely start to see rates increasing again in 2026-27.

The next scheduled BoC rate announcement is January 28th, 2026.

What does this mean for you and your mortgage?

This rate hold reinforces a “wait and see” environment, but it’s not a time to be passive, especially if you have an upcoming renewal.

If you have a variable rate mortgage:

  • Your prime-based rate will remain unchanged. Enjoy the stability for now, but be mindful of the experts who are starting to anticipate potential hikes in late 2026. This is a good time to be setting some extra money aside to prepare for higher mortgage payments this time next year and into 2027.

If you have an upcoming mortgage renewal in 2026:

  • This stable environment is a critical time to plan. While the BoC is holding its policy rate steady for now, the long-term bond markets (which dictate fixed mortgage rates) are always adjusting based on future expectations and fixed rates are likely going to be increasing slowly over 2026.
  • The Best Move: Do not wait until you are close to your renewal date to start investigating options, as you may miss out on short windows of time when fixed rates drop. Instead, get in touch with us now to begin planning for your 2026 renewal. We can watch the rates for you and determine the best time to renew, and also analyze the various products available and help you determine whether a short-term fixed rate or an adjustable rate might be the best option to navigate the current uncertainty and position you for success in your next mortgage term.

Have questions?

We are always happy to discuss your financing needs!

Please book an appointment today with one of our broker team to discuss your plans and we’ll make sure you have all the information you need to make the best financial decision and get the best mortgage to reach your goals.

You can find our best mortgage rates here.

Also, it’s always a good idea to stay informed about any changes to the Prime Rate to understand how it may affect your payments and mortgage renewals. If you aren’t already subscribed, you can sign up to our newsletter for updates directly to your inbox.