Bank of Canada Holds Rates Steady Again

The Bank of Canada held its overnight policy rate at 2.25% on September 2 for the seventh consecutive announcement. The message to the mortgage and housing markets is that the Bank continues their wait-and-see approach, as opposed to taking either a stimulate or restrain approach. This hold was widely expected, and until trade negotiations are settled and a clear direction is set for the Canadian economy we may see the Bank continue this stance.

The Bank of Canada believes the Canadian economy is recovering but "uncertainty is high and new US tariffs and threats of further action pose risks to the sustainability of the recovery." The Bank expressed concern that inflationary pressures persist due to the combination of higher oil prices and the inflationary impact of tariffs and counter tariffs. The Bank stated that "upside risks to inflation have increased, while new tariffs make growth prospects more uncertain."

The bottom line for mortgage borrowers resulting from this announcement:

1. Variable-rate mortgage - no change today
2. Fixed-rate mortgage - no immediate effect; but rising due to bond yields
3. Renewals - remain at current (higher) rates
4. Big Takeaway - rates aren't falling, and the market thinks they may go higher

Fixed mortgage rates are above 4% at most lenders and even in the high 4%-range for some borrowers. While scarce, insured mortgage rates slightly below 4% can be found in some Provinces, so shop around. Variable mortgage rates can be found in the 3.4% to 3.9% range and currently offer a discount to fixed mortgage rates, but consider your risk tolerance - fixed rates provide more predictability if rates increase.

The interest rate environment has stabilized over the past several months. Stable rates are a good thing, even though they have stabilized at a level higher than many would like. For the market to normalize and return to health a stable rate environment is necessary.

Prospective mortgage borrowers need to be proactive. No one knows where rates may go and the inflation pressures brought on by oil prices, tariffs/counter-tariffs, and excessive government borrowing could push bond yields higher. If you are planning to buy a home or renew/refinance your mortgage in the coming months, current conditions leave you exposed to the risk of higher rates ahead. To protect yourself, secure a rate hold or mortgage pre-approval right away. This let's you lock-in today's rates, is available at no cost to you and comes with no obligation or commitment - It is a free option for you to shield yourself from sudden rate increases.

Looking forward, the Bank of Canada has not signaled where rates may go in the future. Market expectations for rate cuts remain low. While the Bank of Canada is widely expected to hold rates steady through the end of 2026, most analysts anticipate gradual increases into 2027, although the size and timing remain uncertain. If this is correct, we could see increases in the prime rate and variable mortgage rates next year.

The prime rate at the banks remains at 4.45%.

There are two Bank of Canada announcements remaining on the calendar in 2026. The next announcement is scheduled for October 28.

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

https://www.bankofcanada.ca/2026/09/fad-press-release-2026-09-02/

Curious what your best mortgage rate could be today?