The Bank of Canada’s decision to hold its overnight rate at 2.25% leaves the mortgage industry focused less on surprise and more on what comes next for strained borrowers and a cooling housing market.
Analysts have widely expected a pause after a stronger‑than‑anticipated November jobs report and a 25‑basis‑point cut in October.
The hold reinforces the Bank’s recent pause‑and‑assess stance as inflation eased from September’s 2.4% pace to 2.2% in October.
CIBC economist Katherine Judge highlights the Bank’s resistance to reading too much into recent upside surprises.
“Policymakers played down recent upside surprises in data, pointing to only some signs of improvement in the labour market, with trade-sensitive sectors still weak and hiring intentions muted, and citing that final domestic demand was flat in Q3, with the headline reading driven by volatility in trade,” Judge wrote.
She added that such “comments that push back on recent upside surprises in the data seem to suggest that the risks ahead would be to the downside, and that resulted in bond yields easing off.” CIBC now expects the policy rate to remain on hold through 2026.
For TD Economics, the message is continuity rather than surprise.
“Dismissing the economy’s resilience would be a mistake, however, the outlook remains challenging and the risks from trade uncertainty remain high,” said Andrew Hencic, director and senior economist at TD Economics.
He noted that a sequence of strong employment reports has pushed markets to reprice the risk of future hikes, but not enough to shift the near‑term path.
“The hold here was widely expected, and we maintain the view that the balance of risks to the outlook will have the Bank on hold in the coming months,” Hencic said.
With CUSMA renewal talks set to intensify and key indicators still clouded by tariff impacts, he added that TD expects the Bank to stick to a “data dependent approach” as it weighs any further moves.
Housing market stability, not a spark
“This rate hold comes as the housing market enters what is traditionally one of the slowest times of year,” said Victor Tran, mortgage and real estate expert at Rates.ca.
“The hold provides some stability, but it’s not likely to spur a significant increase in sales activity during the holiday season. We may see some pickup early next year, if homebuyers feel confident enough to step off the sidelines. But buyer confidence depends on more than just mortgage rates. Inflation, affordability and broader economic health are all factors that potential homebuyers are likely to take into account in their purchase decisions, in addition to potential job loss and other personal life events.”
While the hold anchors variable mortgage rates, a recent 20‑basis‑point rise in bond yields has already pushed some fixed rates higher, with more lenders expected to follow. That dynamic weighs on would‑be buyers and owners facing renewal.
According to the Bank of Canada, roughly two thirds of borrowers renewing in 2026 are expected to see payments increase, with average hikes near 20% and around 10% facing jumps above 40%.
Fixed vs. variable and the renewal crunch
“Affordability stays exactly where it is with today’s hold, and that consistency is meaningful for buyers,” said Leah Zlatkin, licensed mortgage broker and LowestRates.ca expert.
“Many who’ve been waiting for clearer direction see a hold as confirmation that we’re at the bottom of the rate cycle. That sense of predictability often encourages buyers to act before spring competition picks up.”
“Five‑year bond yields have climbed in recent weeks,” Zlatkin said. “That movement is pushing fixed rates higher, and in the last four days we’ve seen promotional specials disappear as lenders reprice.”
Variable rates, she added, remain cheaper than comparable fixed products, but she cautioned that they “may not fall much further, and over the next five years they could rise above today’s fixed rates.”
Commercial outlook and longer‑term risks
On the commercial side, Avison Young’s Canada president, Mark Fieder, said the hold has been widely anticipated and signalled a prolonged pause “barring any developments warranting a cut.”
Lower rates, he said, would be “preferred for commercial real estate, stimulating investment opportunities for those who have been on the sidelines as well as those who have already been actively investing in sectors like multifamily, industrial, and retail.”
Many fixed‑rate borrowers are bracing for a “shock” at renewal as they rolled into higher rates, with analysts warning that payment increases in the coming years could be substantial yet still manageable for most owners in the absence of a severe downturn.
Royal LePage president and CEO Phil Soper framed the rate backdrop as no longer the chief headwind. “Mortgage rates are no longer the villain in this story. Borrowing costs have stabilized at a level that supports healthy market activity. Buyers can move forward without worrying they are missing out on cheaper money tomorrow. That clarity alone will unlock demand,” he said in the company’s 2026 Market Survey Forecast.
For brokers and lenders, rates have steadied, but fixed costs are creeping up and a renewal wave is still coming. Clear guidance on terms, amortization and refinancing remain crucial to help borrowers stay on track.
CMP
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