Economists Expect Bank of Canada to Hold Rates Steady in the Near Term

As the Bank of Canada (BoC) enters the final stretch of 2025, the consensus among major economists, lenders, and market strategists is becoming clearer: the central bank is likely to hold its policy rate at 2.25% for the foreseeable future.
This comes after back-to-back rate cuts earlier in the fall, which gave short-term relief to variable-rate borrowers and sparked renewed optimism in the housing market.

Below is a clear, Clara-style breakdown of what this means for everyday Canadians, mortgage shoppers, and homeowners preparing for renewal.

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Why a “Rate Hold” Is Now the Base Case

• Inflation progress has slowed — not reversed, but slowed.
Economists note that inflation is easing but still not as soft as the BoC would like. The central bank wants more “evidence” that price pressures are firmly under control before cutting again. This makes a rate hold the safest choice for policymakers.

• Growth is stable but fragile.
Canada’s economy is neither booming nor shrinking dramatically. GDP growth is modest, and the labour market is cooling at a controlled pace. A stable policy rate helps maintain balance without overstimulating demand.

• Shelter costs remain sticky.
Even with mortgage relief from earlier cuts, rents and ownership costs remain high. Holding rates allows the BoC to avoid re-accelerating housing inflation — a major policy concern in 2025.

• Bond markets align with a steady path.
Canadian bond yields, which heavily influence fixed-rate mortgages, have levelled out in recent weeks. Markets are pricing in stability, not more cuts.

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What This Means for Mortgage Borrowers

1. Variable-Rate Borrowers: Stability After Two Years of Volatility

• After two policy cuts this fall, homeowners on variable-rate mortgages finally experienced a drop in their payments.
• With a hold expected, borrowers can anticipate a period of flat, predictable payments — a welcome shift from the rapid rate increases of 2022–2023.

Example:
A household with a $600,000 variable mortgage saw their payment fall by around $120–$180/month after recent cuts. If the BoC holds, that payment likely stays where it is for several months.

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2. Fixed-Rate Borrowers: The Window to Lock In May Not Stay Open Forever

• Fixed mortgage rates, especially 5-year fixed options, are tied more to the bond market than to the BoC directly.
• Since bond yields have settled, fixed rates have reached their most stable range of the year.
• Economists warn that if inflation surprises on the upside, bond yields could quickly rise — meaning the deals available today may not last into 2026.

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3. First-Time Buyers: A More Predictable Market

• A rate hold removes one layer of uncertainty for new buyers.
• Builders, sellers, and real estate agents tend to adjust more slowly when policy rates are stable, creating more predictable listing behaviour.
• However, low housing supply — especially in major metros — still limits affordability gains.

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Why the BoC Isn’t Cutting More (For Now)

Even though inflation has cooled significantly from its peak, economists say the central bank faces three constraints:

• Shelter inflation remains Canada’s biggest challenge.
Housing costs now account for a major share of inflation readings.

• The BoC wants to avoid whiplash.
Cutting too fast risks undoing progress and forcing a new cycle of increases.

• Global conditions are uncertain.
Oil prices, U.S. Federal Reserve policy, and geopolitical tensions all influence Canada’s rate path.

The safest choice: pause and wait.

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Market Outlook: When Could the Next Move Come?

Most analysts believe:

• Next 3 months: High probability of a rate hold.
• Spring 2026: Possible cut if inflation improves faster than expected.
• Late 2026: Some economists warn the next move could even be a hike if wage growth or housing rebounds sharply.

In other words, the BoC is keeping all options open — but the near-term picture points to stability.

• Payments are unlikely to rise soon.
• Fixed-rate shoppers have a narrow, stable window to lock in.
• Renewals in 2025–2026 will still be higher than pre-pandemic levels, but lower than the peak pain of 2023–2024.
• The safest financial move right now is planning early, whether you are buying, refinancing, or renewing.

When the BoC pauses, the mortgage market shifts — but not always in obvious ways. If you want a personalized projection for your payments, refinancing options, or lender comparisons: