BoC Holds at 2.25%: Your Mortgage Playbook

The Bank of Canada just hit “pause” again: the overnight rate is holding at 2.25% (December 2025). After a long stretch where every rate announcement felt like a personal finance fire drill, this is the closest thing we’ve had to a predictable moment in a while.

But a rate hold doesn’t mean “nothing to do.” It means the decisions you make now—variable vs. fixed, renew vs. wait, pay down debt vs. invest, cash vs. GICs—should be based on a new reality: policy is steady, while markets (especially bonds) are still restless.

This post is part of our Interest Rates, Banking & Personal Finance series, where we translate Bank of Canada moves into practical next steps. Here’s what the 2.25% hold actually changes, what it doesn’t, and how to plan going into 2026.

What the Bank of Canada’s 2.25% hold actually means

Direct answer: A 2.25% overnight rate hold keeps Canada’s prime rate at 4.45%, which keeps variable borrowing costs steady—for now.

The overnight rate is the Bank of Canada’s main policy lever. Lenders use it as a foundation for their prime rate, and prime is what drives pricing for:

• Variable-rate mortgages
• HELOCs (home equity lines of credit)
• Some variable personal loans

From the source data:

• Overnight rate: 2.25% (held)
• Prime rate: 4.45% (unchanged)
• Lowest 5-year variable mortgage rate cited: 3.45% (unchanged)

The bigger context matters: this hold comes after two consecutive cuts in September and October 2025 (50 bps total) and a longer easing cycle that reduced the policy rate 275 bps from its 5% peak.

Here’s the stance I’m taking: we’re in a “steady policy, jumpy markets” phase. The Bank is signaling stability, but fixed-rate pricing can still move quickly because it’s tied to bond yields, not the overnight rate.

Why the Bank held: strong jobs, strong GDP, inflation near target

Direct answer: The Bank held because the economy didn’t crack—and inflation isn’t forcing their hand.

Three numbers from the RSS content explain most of the decision:

1) Employment surprised to the upside

November employment came in hot: 54,000 jobs added, and unemployment fell 0.4% to 6.5%. A labour market that strong makes it harder to justify further cuts.

2) GDP growth crushed expectations

Canada’s Q3 GDP grew 2.6% (July–September) versus the Bank’s forecast of 0.5%. That kind of beat doesn’t just reduce recession odds; it pushes markets to price in higher-for-longer risk.

3) Inflation is close to the target range

Inflation is still sitting near the 2% goal: headline inflation was 2.2% in October. When inflation is close to target and growth is holding up, the Bank’s default move is to wait.

One nuance the Bank highlighted: trade volatility and tariffs can still cause price swings. That’s why the statement included a clear “we’ll respond if the outlook changes” message.

Variable mortgages: stable payments, but don’t get complacent

Direct answer: If you’re on a variable-rate mortgage, today’s hold likely means your rate and payment stay the same, but your risk hasn’t disappeared.

A hold is a relief for variable borrowers because it preserves monthly cash flow. For many households, that stability is the difference between “manageable” and “tight.”

If you already have a variable mortgage

Do these three things now—while it’s calm:

1. Check your trigger terms. Some variable mortgages have “trigger rates” or “trigger payments” where the lender forces adjustments. Understand your thresholds.
2. Run a payment stress test at +1%. If you can’t handle one more percentage point, you need a buffer plan (extra payments, spending cuts, or a refinance strategy).
3. Use stability to rebuild cash reserves. I’d prioritize an emergency fund over aggressive investing if you’re rate-sensitive.

If you’re shopping for a variable rate

The RSS notes a practical point: lenders can change the discount/spread to prime even when the Bank holds. Translation: you want optionality.

If you’re actively house hunting or planning a purchase early in 2026, a rate hold (pre-approval or commitment window) is often less about predicting rates and more about protecting your options while you shop.

Fixed mortgage rates: the Bank held, but your quote can still rise

Direct answer: Fixed mortgage rates can rise even when the Bank of Canada holds, because fixed pricing follows bond yields, not the overnight rate.

This is the part borrowers keep getting burned by: they hear “rate hold” and assume fixed rates will chill. Meanwhile, bond yields move and lenders reprice.

From the RSS content:

• Fixed rates had already moved up ~20 bps ahead of the announcement.
• Lowest 5-year fixed rate cited: 3.89%.
• The Government of Canada 5-year yield was above 3%.

Why bond yields are pushing fixed rates up

When markets think growth is stronger (like that 2.6% GDP print) and rate cuts are less likely, investors demand higher yields. Lenders then price that cost into fixed mortgage rates.

If you’re deciding between fixed and variable right now, the core trade-off looks like this:

• Variable: steadier today, but exposed to future hikes/cuts
• Fixed: protects your budget, but may cost more upfront if yields keep rising

My stance: if you’re risk-averse or your budget is tight, fixed-rate certainty is underrated. A “slightly higher” fixed rate can be a cheap form of sleep.

Renewing in 2026: a simple decision framework that works

Direct answer: Renewal decisions are easier when you focus on three variables: cash-flow tolerance, time horizon, and rate sensitivity.

A lot of Canadians will renew in 2026 still feeling whiplash from the 2022–2024 rate surge—and the later cuts. The mistake is trying to perfectly time the bottom.

Here’s the framework I’ve found most useful:

1) Cash-flow tolerance (your real risk profile)

Ask: How much payment volatility can we absorb without using credit cards?

• If the answer is “not much,” fixed deserves serious weight.
• If you have surplus cash each month, variable becomes more defensible.

2) Time horizon (how long you’ll keep the mortgage)

• If you might sell within 2–3 years, weigh penalties and portability heavily.
• If you’ll stay put for 5+ years, prioritize total interest cost and stability.

3) Rate sensitivity (what happens if rates rise?)

Even if cuts are unlikely right now, the Bank explicitly left the door open to hikes if inflation re-accelerates.

Do a quick home test:

• Calculate payment at your current rate
• Recalculate at +0.50% and +1.00%
• If that extra amount breaks your budget, treat that as a flashing red light

Savings, GICs, and debt: how a rate hold changes your priorities

Direct answer: A rate hold is usually good for planning: you can set a 3–12 month strategy for savings and debt without fearing an immediate spike.

Rate decisions don’t just affect mortgages—they influence the whole personal finance stack.

Savings accounts: expect competition, but don’t chase forever

With policy steady, promotional savings rates may stabilize. That’s helpful if you’re building:

• an emergency fund
• a down payment
• a tax or tuition buffer

Action step: If you’re holding cash for a known goal in 2026, separate it from your everyday spending account so it doesn’t “evaporate” in December and January.

GICs: good for timelines, not for bragging rights

GIC strategy is straightforward right now:

• If you need the money within 12–24 months, matching term to timeline beats rate shopping.
• If you’re unsure when you’ll need it, consider shorter terms or a ladder.

Debt: this is the quiet winner of a stable-rate period

If you’ve got high-interest consumer debt, a stable policy rate is a window to make real progress.

Prioritize in this order (generally):

1. Credit cards
2. Unsecured lines of credit (often variable)
3. Auto loans
4. Mortgage principal (unless you’re very rate-sensitive)

Not glamorous, but effective.

2026 watchlist: what could still move rates and mortgage pricing?

Direct answer: Even with a steady overnight rate, mortgages can reprice if trade uncertainty, inflation, or U.S. policy shocks the bond market.

Three things to watch going into 2026:

1) Tariffs and trade policy volatility

The Bank flagged tariffs as a source of price volatility and economic disruption. If tariffs push inflation up, cuts become less likely—and hikes return to the conversation.

2) USMCA renegotiation pressure

The RSS content points to USMCA renegotiations expected to start in summer. If talks deteriorate, export costs rise, growth outlook shifts, and markets react fast.

3) U.S. Federal Reserve decisions

Even though Canada sets its own policy, U.S. rate moves ripple into bond markets, which can push Canadian fixed mortgage rates around.

If you’re rate-shopping, the practical implication is simple: don’t wait for the next Bank of Canada meeting to request a fixed-rate quote. Bond markets move in real time.

Your next best move (based on your situation)

Direct answer: A 2.25% Bank of Canada rate hold is a green light to plan—but you still need to pick a strategy that matches your risk tolerance.

Here’s the most useful “do this now” list I can offer:

• Variable borrowers: Use the stability to rebuild savings and run a +1% stress test.
• Fixed-rate shoppers: If you’re buying soon, consider locking a rate window early—bond-driven increases can happen quickly.
• Renewals in 2026: Decide based on cash-flow tolerance first, then optimize the rate. Budget safety beats bragging rights.
• Savers/investors: Match cash to timeline (savings/GICs) and keep long-term investments long-term.

Rate announcements are easy to treat like sports scores. The better approach is to treat them like planning prompts: What can I do this month that my future self will thank me for?

If the Bank stays on hold into early 2026, will you be in a more flexible position—or the same one?