Variable rates remain unchanged!

Today, the Bank of Canada announced that it is NOT changing interest rates.

• The overnight rate remains at 2.25%

• The prime rate stays at 4.45%

What does this mean for you?

This decision affects variable and adjustable rate mortgages, as well as lines of credit. It does not affect fixed-rate mortgages at this time.

How this impacts different products

• Home Equity Line of Credit (HELOC):HELOCs are typically priced at Prime + 0.50%, keeping the current rate at 4.95%.

• Variable / Adjustable Rate Mortgages:These are usually priced between Prime – 0.50% and Prime – 1.10%, meaning current rates range from 3.35% to 3.95%.

What is the Bank of Canada overnight rate?

The overnight rate is the interest rate major banks use to lend money to each other overnight.The Bank of Canada sets this key rate to help manage the economy:

• They may lower it to encourage borrowing and spending

• They may raise it to help control inflation and debt

When the overnight rate changes, lenders usually adjust their prime rate, which is used to set rates for mortgages, loans, and lines of credit.

Fixed vs. Variable Rates

• Variable rates can change when the prime rate changes

• Fixed rates stay the same for the full term and are only affected at renewal

Should you lock into a fixed rate?

Historically, variable rates have tended to save borrowers more money over the long term.Before switching to a fixed rate, consider the following:

• Are you planning to sell your home soon? If so, staying variable is often the better option.

• Can your budget handle potential payment increases if rates rise?

• Do you plan to make extra payments? Lower variable rates can help you pay off your mortgage faster.

If you’re thinking about locking in, we recommend chatting with us first. We have a handy calculator that can help forecast your potential savings and determine the best option for you.

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Whats to come??

Source: First National - one of Canada's largest non-bank mortgage lenders, offering both commercial mortgages and residential mortgage solutions.

The Bank of Canada is ushering in the new year by keeping its benchmark interest rate at 2.25%. Prior to this announcement, some market commentators were unsure of where the Bank would land with this decision, due to mixed economic signals. Now we know. The Bank’s rationale is summarized below.

Canadian Economic Performance and Employment

• Growth in Canada continues to be disrupted by US trade restrictions and uncertainty

• After a strong third quarter, Canadian GDP growth in the fourth quarter “likely stalled”

• Exports continue to be buffeted by US tariffs; domestic demand appears to be picking up

• Employment has risen in recent months, although the unemployment rate remains elevated at 6.8% and relatively few businesses say they plan to hire more workers

Oil prices and the C$

• Recent weakness in the US dollar has pushed the Canadian dollar above 72 cents US, roughly where it had been since the Bank’s Monetary Policy Report in October

• Oil prices have been fluctuating in response to geopolitical events and, going forward, are assumed to be slightly below the levels in the October report

Canadian Inflation and Outlook

• Inflation, measured by the Consumer Price Index (CPI), picked up in December to 2.4%, boosted by base-year effects linked to last winter’s GST/HST holiday

• Excluding the effect of changes in taxes, inflation has been slowing since September

• The Bank’s preferred measures of core inflation have eased from 3% in October to around 2.5% in December

• For 2025 as a whole, inflation was 2.1%

• The Bank expects inflation to stay close to its 2% target over the projection period, with trade-related cost pressures offset by excess supply

Global Economic Performance and Outlook

• Economic growth in the United States continues to outpace expectations and is projected to remain solid, driven by AI-related investment and consumer spending

• Tariffs are pushing up US inflation, although their effect is expected to “fade gradually” later this year

• In the euro area, growth has been supported by activity in service sectors and will get additional support from fiscal policy

• China’s GDP growth is expected to slow gradually, as weakening domestic demand offsets strength in exports

• The Bank expects global growth to average about 3% over the projection horizon

Outlook for Canada

The BoC forecasts that economic growth will be “modest in the near term” as population growth slows and Canada adjusts to US protectionism. In its projection, the Bank suggests that consumer spending will hold up and business investment will strengthen gradually, with fiscal policy providing some support.

The Bank projects growth of 1.1% in 2026 and 1.5% in 2027, broadly in line with its October projection.

A key source of uncertainty, according to the Bank, is the upcoming review of the Canada-US-Mexico Agreement.

Overall, the Bank says its outlook for the global and Canadian economies is “little changed” relative to the projection in the October Monetary Policy Report and that global financial conditions have remained accommodative overall. However, this outlook “is vulnerable” to unpredictable US trade policies and geopolitical risks.

Final comments

The Bank indicated that its monetary policy is focused on keeping inflation close to the BoC’s 2% target while helping the economy through this period of “structural adjustment.”

Governing Council believes the current policy interest rate “remains appropriate, conditional on the economy evolving broadly in line” with the outlook it published today. However, uncertainty is heightened and the Bank is monitoring risks closely.

The Bank added that if the outlook changes, it is “prepared to respond.”

Overall, the Bank reinforced that it is committed to ensuring that Canadians continue to have confidence in price stability “through this period of global upheaval.”

Stay Tuned

Next Schedule Interest Rate announcements will be March 18th, 2026