Bank of Canada Maintains Policy Rate at 2.25% January 28, 2026

The Bank of Canada kicks off 2026 by holding rates steady, announcing this morning that its overnight policy rate will remain unchanged at 2.25%. This is the second straight announcement with no change, indicating that rates may have leveled off for the time being. Economists are forecasting this stability to continue for the foreseeable future, providing a much needed breather in the mortgage market.

The Bank of Canada stated that "Monetary policy is focused on keeping inflation close to the 2% target while helping the economy through this period of structural adjustment. Governing Council judges the current policy rate remains appropriate, conditional on the economy evolving broadly in line with the outlook we published today."

We start off the year with the Bank of Canada Policy Rate 1.0% lower than it was at the start of 2025. The housing affordability math is better today, but still strained for some potential homebuyers. There is no consensus on longer term expectations though, as some analysts expect that the policy rate could be higher by the end of the year. Time will tell, forecasts that far out in the future are hard to rely on.

The prime rate at the major banks and variable mortgage and HELOC rates with all lenders should remain unchanged. Bond yields have held steady and are only 0.07% lower than they were on the date of the last Bank of Canada rate announcement on Dec 10. Despite that bond rate stability some mortgage lenders have lowered fixed mortgage rates to win more business. Most variable mortgage rates remain lower than fixed mortgage rates for the equivalent term.

While lower rates are hoped for by many, they are not to be expected. However, this rate stability is good news for mortgage borrowers. Why?

Predictability: Stable rates mean you can plan your finances with confidence, without worrying about sudden hikes or missing out on sudden drops.
Affordability: Rates are now in a normal range and consistent borrowing costs make it easier to budget for your dream home or refinance.
Opportunity: If you are on the fence about locking in a rate, now is a prime time to explore options and understand the math before any potential shifts.

Looking forward, expectations for cuts are low and economists expect the Bank to remain on hold through 2026. The Bank's neutral range, where the overnight rate neither stimulates nor restricts the economy, is 2.25% to 3.25%. With the current policy rate sitting at the lower end of that range (2.25%), the Bank is likely to be cautious about additional cuts unless we see significantly weaker economic data. No such signs exist today and the Bank stated "it is too early to tell how the Canadian economy will adjust to current tariffs and ongoing uncertainty."

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/2026/01/fad-press-release-2026-01-28/

The next Bank of Canada rate announcement is scheduled for March 18th.

< Previous

About The Author

Don Scott

Don Scott is the founder of a challenger mortgage brokerage that is focused on improving access to mortgages. We can eliminate traditional biases and market restrictions through the use of technology to deliver a mortgage experience focused on the customer. Frankly, getting a mortgage doesn't have to be stressful.

Connect with Don on LinkedIn!

Mortgage Rate Forecast For 2026

By George Holicka • January 27, 2026

What are Canadian mortgage rates going to do in 2026? We expect mortgage rates to remain fairly stable through 2026. We think that the Bank of Canada will hold rates steady for much of the year, though some analysts are calling for hikes in the latter half of the year. Bond yields are also expected to remain stable, meaning that fixed mortgage rate should not move much. Predictions are difficult and the markets are sending mixed signals right now. Read on to find out what this might all mean? 2026 Mortgage Rate Prediction Mortgage rates should remain within a close range near current rates for most of 2026. Variable mortgage rates will follow the Bank of Canada rates, which are expected to remain flat for the first half of the year. Bond yields could fluctuate with economic news and fixed mortgage rates will follow but are likely to remain within the high-3% to mid-4% range, absent any significant economic surprises. Variable Mortgage Rates in 2026 We expect variable mortgage rates to remain mostly unchanged in 2026, potentially increasing by 0.25% to 0.50% if the Bank of Canada hikes toward year-end. The one huge caveat to this is that if the ongoing trade discussions with the US go poorly, weakening Canada’s economy, there may be an incentive for the Bank of Canada to make some cuts, as long as inflation remains under control. We do not hope for this poor economic news so prefer to not predict it to be likely. Variable mortgage rates are now below fixed mortgage rates and should remain there for the time being. We anticipate five-year variable mortgage rates for the best borrowers to range from 3.4% to 4% throughout the year, depending on any policy shifts. Fixed Mortgage Rates in 2026 We do not expect much change in fixed mortgage rates in 2026, but there is a risk that fixed rates could increase. Bond yields have already priced in limited Bank of Canada cuts and have been stable lately. The recent stability in the US 10-year Treasury yield around 4.2% suggests the bond market is cautious about further cuts. In Canada, bond yields are exactly where they were one year ago, with the five-year Canada bond at 2.88% in late January 2026. We must pay heed to those signals since fixed mortgage rates depend on the bond market. We anticipate five-year fixed mortgage rates to range between 3.7% and 4.3% for most of the year. We rely on market inputs to generate our own expectations for mortgage rates in 2026. Those key inputs include: The Bank of Canada has indicated the current overnight rate of 2.25% is "about right" to keep inflation near 2%, but stands ready to respond if needed; Economists are forecasting moderate Canadian economic growth, which may not require further stimulus; The US Federal Reserve is expected to cut rates gradually in 2026, potentially two to three times, but with uncertainty from trade policies; The US 10-year Treasury yield has hovered around 4.2% in early January 2026; Canadian 5-year bond yields are around 2.88% in late January 2026, flat to a year ago and showing no signs of a downward trend; and Excessive government borrowing puts pressure on bond yields to rise to entice investors to buy the large volume of government debt There are many risks that are not priced in yet that could materialize. Economic weakness or tariff impacts could prompt more rate cuts and lower bond yields. The trade agreement between Canada, Mexico and the US expires this year and needs to be renegotiated. Economic strength or resurgent inflation could lead to hikes and higher rates. There are also political and geopolitical risks that are making headlines that are not in our area of expertise. They are difficult to predict but could significantly impact our interest rate markets in 2026, a year currently marked by uncertainty. What Happened to Mortgage Rates in 2025? In 2025, Canadian fixed mortgage rates remained relatively stable, declining by a modest 0.20% through the year. Canadian variable-mortgage rates declined by 1.0%, in lockstep with the Bank of Canada reducing their target rate by the same amount in 2025. The Canadian market entered 2025 with expectations for gradual Bank of Canada cuts, which materialized with reductions totaling 1.00% from January through October. The first cuts came in January and March (0.25% each), followed by holds through summer, then additional 0.25% cuts in September and October. The end result was a reduction in the overnight rate to 2.25% where it remains as we embark on a new year in 2026. The Bank of Canada rate cuts in 2025 had the expected direct impact on variable mortgage rates, which dropped by the same amount. Fixed rates are ‘forward-looking’, so they moved in anticipation but stabilized as cuts slowed. As the chart shows, fixed mortgage rates have levelled off over the past year.