Dec 10th, 2025: The Bank of Canada announced its latest policy decision today, opting to hold the overnight rate at 2.25%. After a year of multiple rate reductions, today’s hold signals that policymakers believe interest rates are now at an appropriate level to support economic growth while still managing inflation.
For homeowners, buyers, and investors, today’s decision brings a welcome dose of predictability. Although borrowing costs were expected to continue easing, strong economic performance and stubborn inflation have led to a temporary pause in further cuts.
Why the Bank of Canada Decided to Hold
Stronger Economic Momentum
Recent data shows that the Canadian economy has been more resilient than expected. Canada has shown for three consecutive months stronger-than-expected hiring across the country, wage growth has been steady, and overall GDP growth has exceeded earlier estimates. When the labour market is strong and households are spending, economic conditions tend to support higher inflation—which central banks need to manage carefully.
Inflation Remains Above Target
Headline inflation has eased since earlier peaks, but core inflation continues to sit above the Bank’s 2% target. Several factors are keeping prices elevated, including wage growth, inventory costs, supply-chain adjustments, and trade-related pressures. If the Bank were to cut rates again too soon, there is a risk of re-accelerating inflation, especially in areas like housing and consumer spending.
Allowing Previous Rate Cuts to Take Effect
Earlier rate cuts announced this year have already started to reduce borrowing costs across mortgages, business lending, and consumer credit. However, monetary policy typically takes months to fully influence spending and inflation. By holding rates, the Bank is taking a measured approach—giving households, businesses, and lenders time to adjust before making another move.
What a Rate Hold Means for Borrowers and Homeowners
- Variable-Rate Mortgages & HELOCs
Since variable products are closely tied to the overnight rate, most borrowers should not see immediate rate changes as a result of today’s announcement. Payments and interest costs should remain stable in the short term. - Fixed-Rate Mortgages
Fixed mortgage rates are influenced more by government bond yields than the Bank’s overnight rate. While today’s hold does not directly determine fixed rates, policy stability generally reduces volatility in bond markets, which may help keep fixed mortgage pricing more predictable for the time being. - Consumer & Business Loans
A neutral rate environment helps maintain borrowing conditions for personal loans, auto financing, and small business lending. For clients considering new financing or expansions, stable rates make planning easier. - Savings and Deposits
The flip side of lower interest rates is that savings returns remain modest. Until the Bank signals a shift toward higher rates, deposit rates are likely to remain subdued.
Looking Forward: What to Watch Over the Next Six Months
Most market analysts now believe the Bank of Canada has reached the end of its current easing cycle. Unless inflation slows materially or the economy shows signs of weakness, rates are likely to remain near current levels for some time.
However, the path ahead is not fixed. Over the coming quarters, expect monetary policy to be influenced by:
- New inflation readings
- Wage and employment trends
- Household demand and spending
- Global trade disruptions or geopolitical tensions
- The pace of U.S. Federal Reserve policy adjustments
If inflation cools more quickly than expected, further rate cuts remain possible. If economic strength persists or inflation re-accelerates, the Bank may shift toward tightening again in the future.
Final Perspective
Today’s hold represents a moment of policy stability—an opportunity for buyers, sellers, and homeowners to make decisions without the rapid rate changes we experienced post-pandemic. While borrowing costs are lower than they were at peak levels, the Bank is clearly balancing affordability with inflation management.
For anyone planning a renewal, purchase, investment, or equity refinance, this is an excellent time to review your strategy. Stable rates provide clarity, and the lending environment remains competitive.
Give your Mortgage Professional a Call Today
Navigating your current situation may seem challenging, given the various factors influencing your mortgage. However, finding a solution is within reach. Whether you seek clarity, guidance, or simply peace of mind during these complex times, we’re here to assist you every step of the way.
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