Bank of Canada Leaves Rates Unchanged

December 10, 2025

The Bank of Canada announced this morning that it is leaving its overnight policy rate unchanged, following rate cuts in both September and October. This is not surprising given recent strong jobs numbers and an economy that is growing more than expected. The Bank of Canada's overnight policy rate will remain at 2.25%, and expectations for further cuts in the near future are low.

The Bank of Canada stated that "If inflation and economic activity evolve broadly in line with the October projection, Governing Council sees the current policy rate at about the right level to keep inflation close to 2% while helping the economy through this period of structural adjustment. Uncertainty remains elevated. If the outlook changes, we are prepared to respond."

This final rate decision of 2025 leaves the Bank of Canada Policy Rate 1.0% lower than at the end of 2024.

While many remain hopeful for more rate cuts, the market is now betting that the Bank of Canada's next move will be an interest rate hike, sometime in the second half of 2026.

The prime rate at the major banks and variable mortgage and HELOC rates with all lenders should remain unchanged. However, bond yields spiked higher after the strong jobs numbers last week. This has led to many lenders increasing their fixed mortgage rates this week. Many variable mortgage rates are now lower than fixed mortgage rates for the equivalent term.

The five-year Canada bond yield is now higher by about 0.30% since the last Bank of Canada rate cut on October 29. While this is not good news, we are seeing most borrowers prefer fixed rates. In a 'normal' market this is always the preference and perhaps this move back to fixed mortgage rates is a sign of better days ahead. Longer term fixed rates should gain in popularity as more borrowers prefer safety and predictability in order to avoid exposure to stressful interest rate fluctuations. 

Looking forward, expectations for cuts are low and the the Bank of Canada stated they "agreed that a policy rate at the lower end of the neutral range was appropriate to provide some support for the economy as it works through this structural transition while keeping inflationary pressures contained.” The Bank's neutral range is 2.25% to 3.25%.

The housing market in some major centres is now a buyer's market and those that can afford to buy in this environment can take advantage. If you are waiting for rates to drop further you may be disappointed. Start your search for a new home by getting a mortgage pre-approval to lock-in a rate and protect yourself. Current mortgage holders should run the numbers and see if refinancing at lower rates make sense. Whatever your situation, talk to us at Frank Mortgage to discover your best options.

The prime rate at the banks remains at 4.45%.

You can read the Bank of Canada's full press release here - 

https://www.bankofcanada.ca/2025/12/fad-press-release-2025-12-10/

The next Bank of Canada rate announcement is scheduled for Jan 28th.

Curious what your best mortgage rate could be today?

Do you have questions about a new mortgage, renewal or refinancing?