Bank of Canada Holds Rate at 2.25%

Date Posted: April 29, 2026

 

 

 

 

MORTGAGE MARKET UPDATE   |   April 29, 2026

 

A message to our valued clients regarding your mortgage strategy

 

Bank of Canada Holds Prime Rate - What This Means for You

Today, the Bank of Canada announced it is holding its overnight policy rate steady, leaving the prime rate unchanged. While this decision may feel routine on the surface, it comes against a backdrop of genuine economic uncertainty - and for clients holding a Variable Rate Mortgage (VRM) or Adjustable Rate Mortgage (ARM), it deserves your attention.

 

The Economic Picture: Reasons for Caution

 

INDICATOR	CURRENT STATUS
GDP Growth	Weak - the economy is underperforming expectations, signalling limited appetite for rate hikes.
Employment	Softening - job numbers have come in below trend, reducing consumer spending pressure.
Inflation	Ticking upward - driven in part by the Iran conflict's impact on global energy prices and supply chains.

 

The interplay of these factors creates a complex environment: the Bank of Canada is caught between a fragile economy (which argues for rate cuts) and rising inflation tied to geopolitical tension (which argues against them). The result - for now - is a hold.

 

What This Means If You're on a Variable or Adjustable Rate

If you are currently holding a VRM or ARM, today's news is neither cause for alarm nor celebration - but it is a good reason to reassess.

Our view is that continuing to ride your variable rate remains a reasonable strategy. Here's why:

• With GDP growth soft and employment weakening, the Bank of Canada has little economic justification to raise rates. Further cuts are arguably more likely than hikes over the next 12-18 months.
• The inflation uptick, while real, appears largely tied to external supply-side factors (energy, imports) rather than domestic overheating - historically, the Bank has shown restraint in raising rates against this type of inflation.
• Your variable rate today almost certainly carries a lower effective rate than what a new 5-year fixed term would offer.

 

Thinking About Locking In? Here's the Math.

We understand that variable rates can feel uncomfortable, especially in a period of geopolitical uncertainty. If you're losing sleep over potential rate moves, locking in is worth discussing. But before you do, consider this:

Today's 5-year fixed rates are running approximately 0.75% higher than current variable rates.

That means if prime remains flat - which our current outlook suggests is the more likely scenario - locking in today will cost you more over the full 5-year term, not less.

To put it simply: locking in is buying certainty, not savings. If rates stay flat or drop, you will pay a premium for that peace of mind. That may still be the right call for your personal situation - but it should be a conscious, informed decision, not a reaction to short-term noise.

For rates to make a lock-in cost-neutral, the Bank of Canada would need to raise the prime rate by approximately 0.75% and hold it there for the duration of your term. Given current GDP and employment data, that scenario - while possible - is not our base case.

 

Our Recommendation

For most variable rate clients, we suggest staying the course for now. The economic data supports a stable-to-declining rate environment over the near term, which continues to favour variable rate holders.

That said, every client's situation is different. If you have a low tolerance for rate risk, a tight monthly budget, or are approaching renewal, locking in might make sense for you - and we're happy to model out the numbers specific to your mortgage.

Please don't hesitate to reach out. We're here to help you make the decision that's right for you, not just the market.

 

This newsletter is for informational purposes only and does not constitute financial advice.