BoC Expected to Hold Policy Rate at 2.25% This Week After Two Cuts in 2025

December 8, 2025 —

Canada heads into the final Bank of Canada (BoC) announcement of the year with a rare sense of stability. After two rate cuts in September and October, the benchmark overnight rate now sits at 2.25% — and economists widely expect the central bank to hold steady at this level during the upcoming decision.

For homeowners navigating renewals, new homebuyers dealing with affordability questions, and variable-rate borrowers seeking predictability, a December rate hold sets the tone for a quieter winter mortgage season.

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1. What’s Behind the Expected Hold?

Throughout 2025, the BoC signalled a shift toward easing as inflation pressures gradually softened. The two cuts earlier in the fall brought borrowing costs down from restrictive levels, helping ease the financial strain on households, especially those facing high renewal shock.

But now, according to analysts at True North Mortgage and Perch, the bank is entering an important pause phase.
The BoC wants to “evaluate the impact of earlier cuts before moving further”, especially as:

• labour market growth cools,
• services inflation remains sticky, and
• parts of the housing market show signs of re-acceleration.

This combination makes a December hold the most widely supported scenario among economists.

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2. What Earlier Cuts Achieved

The rate cuts delivered in September and October 2025 were aimed at reducing borrowing stress without overstimulating demand. Those reductions lowered the benchmark rate to 2.25%, creating a more manageable environment for households facing renewals in late 2025 and early 2026.

For many borrowers who locked in mortgages in 2020–21 at ultra-low levels, renewal increases were projected at 20–25% earlier this year. After the cuts, that expectation has moderated to the 10–15% range in many cases — still difficult, but less severe than feared.

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3. How This Impacts Borrowers Right Now

• Renewals Become More Predictable

If the policy rate holds at 2.25%, the mortgage renewal experience stabilizes. Borrowers still face higher payments than their pandemic-era rates, but the jump is smaller and easier to plan for.

• Variable-Rate Borrowers Get Rare Stability

The prime rate, sitting near 4.45%, is unlikely to move immediately.
This means:
• no payment changes,
• no new trigger-rate risks,
• easier month-to-month budgeting.

After two years of volatility, this pause feels like a financial breather for variable borrowers.

• New Buyers See a Clearer Window

Those in the market this winter benefit from:
• steady pre-approval rates,
• stable fixed-rate offers under 4%, and
• fewer week-to-week surprises.

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4. Where Fixed and Variable Rates Stand This Week

Lenders have already priced in a likely December hold.
As of December 8, 2025:

Five-year fixed (insured): 3.74%–3.89%
Five-year fixed (uninsured): 3.89%–4.09%
Three-year fixed: 3.99%–4.29%
Prime rate: ~4.45%

While fixed rates depend more on bond yields, the BoC’s stance influences market confidence — and stability generally helps rate shoppers.

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5. Why the BoC Is Hesitant to Cut Further

Economists highlight three key reasons:

• Inflation Is Lower, But Not Low Enough

Shelter inflation, particularly rent and ownership costs, continues to pressure households.
Cutting too aggressively risks reigniting price increases.

• Wage Growth Has Slowed

Cooling wage trends help inflation, but the BoC wants confirmation this isn’t a temporary dip.

• Housing Market Shows Early Signs of Heating Up

Markets like Calgary, Halifax, Windsor, Edmonton, and pockets of the GTA are showing stronger-than-expected fall activity.
Another cut could add fuel to early 2026 buying cycles.

The BoC is widely expected to maintain the policy rate at 2.25% this week, signaling a period of stability heading into 2026. Borrowers renewing or entering the market over the next six months will benefit from clearer rate expectations and calmer borrowing conditions.

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