What the Bank of Canada interest rate hold means for you
The Bank of Canada (BoC) announced that it is holding its key interest rate at 2.25 per cent on Wednesday.
It has maintained this rate since October 2025, but things could change depending on how the war between the United States and Iran unfolds.
“The war in the Middle East has increased volatility in global energy prices and financial markets, and heightened the risks to the global economy,” reads the announcement. “The breadth and duration of the conflict, and hence its economic impacts, are highly uncertain.”
Canada’s central bank attributed this volatility to the spike in global oil and natural gas amid the conflict, which it says will boost global inflation in the near-term. In addition to disruptions to fuel supply, transportation bottlenecks due to the closure of the Strait of Hormuz could impact the supply of other commodities.
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Although inflation eased to 1.8 per cent in February, down from 2.3 per cent in January, Food inflation still remains elevated, according to the BoC. It adds that the sharp increase in global fuel prices has led to soaring gas prices, which will push up total inflation in the coming months.
“Inflation risks have gone up due to higher energy prices. We will continue to assess the impact of US tariffs and trade policy uncertainty, and how the Canadian economy is adjusting,” reads the announcement. “We are also monitoring the unfolding conflict in the Middle East closely and assessing its impact on growth and inflation.”
Here’s what all of this means for the everyday Canadian.
Could the Bank of Canada hike the interest rate?
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Ratehub mortgage expert Penelope Graham says the Bank of Canada rate hold is essentially an indication that it’s “on standby” as it monitors the impacts of the global conflict and economic growth and inflation at home.
“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,” she explains.
Ashish Dewan, investment strategist at Vanguard Canada, says the BoC will likely need a more prolonged deterioration in labour conditions before cutting again.
In the meantime, he says the government’s fiscal policy is already providing stimulus through infrastructure spending, housing programs, and targeted credits, “reducing the need for additional monetary support.”
However, he adds that the Bank of Canada’s monetary policy is “ill-suited to address” ongoing trade tensions and geopolitical challenges, which limits the possibility of rate cuts as a response.
“If the Middle East conflict were to become protracted and persist for more than two quarters, the Bank of Canada would likely become more inclined to hike rates, as headline inflation could rise by roughly 75 basis points and core inflation by about 30 basis points,” explains Dewan. “We expect the Bank of Canada to hold its policy rate at 2.25 per cent throughout the year in our base case.”
What this means for mortgage rates
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If you’re holding out for lower mortgage rates before buying a home, Graham says this prolonged rate hold means “zero relief.”
However, Phil Soper, president and CEO of Royal LePage, notes that the key takeaway from this decision is stability.
“Today’s decision provides households with a measure of certainty as they plan major financial commitments in the weeks ahead,” he explains.
Graham says the current variable-rate pricing isn’t bad news for homebuyers or those planning to renew their mortgage.
“Variable-rate pricing — currently at a low of 3.35 per cent – 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,” she says.
On the other hand, fixed mortgage rates are feeling upward pressure, as it becomes less likely that both the Bank of Canada and the American central bank will lower the rate in the near future.
What the Bank of Canada rate hold means for the housing market
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Graham says the most recent February data from the CREA shows home prices continue to soften, making it more affordable for prospective home buyers.
“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,” she explains. “Today’s cooler pricing and competitive mortgage rates could offer the incentive for many to finally come off the sidelines.”