BoC Holds Rate at 2.25%: Your Money Next Moves

On December 10, 2025, the Bank of Canada held its policy interest rate at 2.25% (with the Bank Rate at 2.5% and the deposit rate at 2.20%). That single sentence is enough to change how a lot of Canadians should think about January renewals, variable mortgage payments, and what to do with cash sitting in a savings account.

Here’s the stance I’m taking: a “hold” is not a “nothing happened.” When the Bank stays put after inflation has been hovering near target, it’s a signal that we’re in a more normal (but still jumpy) rate environment—one where your best move is less about guessing the next announcement and more about building a plan that works if rates barely budge or if they surprise you.

This post is part of our Interest Rates, Banking & Personal Finance series, where we translate rate decisions into practical choices—mortgages, savings, debt, and investing—without pretending anyone can predict 2026 perfectly.

What the Bank’s 2.25% hold actually signals

Answer first: The Bank of Canada is saying the current policy rate is “about the right level” to keep inflation close to 2% while the economy adjusts, but it’s ready to change course if inflation or growth breaks away from expectations.

In its statement, the Bank highlighted three realities that matter for personal finances:

• Inflation is near target, but not fully “solved.” CPI inflation was 2.2% in October, and the Bank judges underlying inflation to be around 2.5% (with core measures 2.5%–3%). That means they’re not eager to cut aggressively.
• Growth is choppy. Canada’s GDP grew 2.6% in Q3, but the Bank said a lot of that strength came from trade volatility, while final domestic demand was flat.
• Uncertainty is elevated (again). Global trade upheaval, tariffs, and shifting supply chains are pushing costs around. The Bank expects economic slack to offset some of those pressures, keeping inflation close to target—but it called out “choppiness,” including near-term inflation that could look higher due to the base effects from last year’s GST/HST holiday.

A practical translation: rates might not drop quickly, and future changes could come in bursts if inflation flares up or growth weakens.

The part most people miss: “Hold” creates clarity for planning

When the Bank hikes, everyone panics. When the Bank cuts, everyone rushes. When the Bank holds, you get something valuable: a planning window.

If you’re renewing a mortgage in early 2026, deciding how aggressive to be with investing, or trying to get out of high-interest debt, a steady policy rate supports a steady approach—stress-tested for a few plausible paths.

Snippet-worthy reality: You don’t need to predict the next rate decision to make good financial choices—you need a plan that survives more than one outcome.

Mortgages: what 2.25% means for variable and fixed rates

Answer first: A Bank of Canada hold usually means variable mortgage rates won’t change immediately, while fixed mortgage rates can still move based on bond yields and market expectations.

Let’s break this down depending on where you are.

If you have a variable-rate mortgage

Variable mortgage rates are closely tied to lenders’ prime rates, which follow the Bank’s overnight rate.

• If your variable rate has adjustable payments, your payment likely stays the same for now.
• If your variable rate has fixed payments (with amortization changing), your payment might not change immediately, but your amortization can still be weird if you’re not paying down principal as expected.

Actionable check (takes 10 minutes): Look at your latest statement and find:

• Your current amortization
• How much of your payment is interest vs principal
• Whether your lender is applying prepayments correctly

If amortization drift is still happening, a hold is a good time to make a clean adjustment (even a small one) rather than waiting for a future surprise.

If you’re renewing in 2026

A hold at 2.25% doesn’t guarantee cheaper renewals, but it does support a strategy that balances certainty and flexibility.

Three renewal approaches that tend to hold up well:

1. Shorter fixed term (2–3 years) if you want payment stability but don’t want to lock in for too long.
2. Variable with a payment buffer if you can afford the swings and want flexibility.
3. Split mortgage (part fixed, part variable) if you’re the type who hates being “wrong” either way.

If you’re close to renewal, don’t just shop “rate.” Shop penalties, prepayment privileges, portability, and refinance options. Those features matter more in an uncertain environment.

If you’re buying a home (or trying to) in winter 2025

December is a funny time for housing decisions—people are tired, distracted, and motivated to “start fresh” in January.

If you’re buying now:

• Treat the current rate environment as sticky, not temporary.
• Qualify your budget using a “real-life test” that’s harsher than what the bank requires.

A simple stress test I like: run your housing budget at +2 percentage points above the rate you expect, and see if you can still save at least something monthly. If you can’t, the home is too expensive for your lifestyle.

Savings: the quiet win when rates stop whipping around

Answer first: When the policy rate holds, savings rates often stabilize too—so you can finally choose the right account structure without chasing teaser rates every month.

If you’ve had cash sitting in a low-interest chequing account, a steadier rate environment is your nudge to organize.

A “cash ladder” that fits real life

I’ve found most people don’t need one perfect account. They need three buckets:

1. Bills buffer (0–1 month): chequing
2. Emergency fund (3–6 months): high-interest savings or cashable options
3. Planned spends (6–24 months): more rate-sensitive options where you can lock for a bit if the return is worth it

The Bank’s messaging—underlying inflation ~2.5%, CPI around target—supports this idea: cash should earn something, but you still need liquidity because the economy is in “structural adjustment,” not smooth sailing.

Don’t ignore after-tax returns

If you’re holding non-registered savings, interest income is fully taxable. So a “good” posted rate isn’t always a good net return.

A quick decision rule:

• If the money is for a near-term goal, clarity beats optimization.
• If it’s long-term money, it probably shouldn’t be sitting in cash because you’re trying to out-earn inflation with one hand tied behind your back.

Investing: what this rate decision means for 2026 positioning

Answer first: A 2.25% policy rate hold supports a “balanced, quality-first” approach—avoid making your portfolio a bet on fast rate cuts.

The Bank’s statement matters for investors because it hints at a base case: inflation near target, underlying inflation still a touch high, growth expected to improve in 2026, and uncertainty elevated (trade shifts, tariffs, volatility in exports).

If you’re a conservative investor

You may be tempted to keep everything in cash because it finally earns something. The risk: cash loses purchasing power over time if inflation averages near 2% and your after-tax return is lower than you think.

A steadier rate environment is often a good time to:

• Reconfirm your time horizon
• Decide what portion is truly sleep-at-night money
• Put a basic rebalancing rule in writing (so you don’t panic-buy or panic-sell)

If you’re an aggressive investor

Don’t build a plan that only works if the Bank starts cutting quickly. The Bank explicitly said the current rate is about right if things evolve as projected.

A more durable approach:

• Keep your equity exposure aligned to your horizon
• Avoid taking on extra leverage because “cuts are coming”
• Hold a real emergency fund so you don’t have to sell investments during a drawdown

A simple 2026 playbook (not a prediction)

Instead of guessing direction, prepare for scenarios:

• Scenario A: Rates stay near current levels. Focus on debt payoff strategy and steady investing.
• Scenario B: Rates fall modestly. Consider accelerating principal payments if you were waiting for relief, and reassess fixed-vs-variable at renewal.
• Scenario C: Inflation re-accelerates and rates rise. Your protection is a lower debt load, a leaner budget, and fixed-rate certainty where it matters.

Debt and budgeting: the move that beats rate forecasts

Answer first: The best “interest rate strategy” for most households is getting rid of high-interest debt and building a payment buffer—because those wins don’t depend on the Bank’s next move.

If you’re carrying credit card balances or high-interest unsecured debt, a 2.25% policy rate is basically irrelevant compared to your real problem.

The priority order that actually works

1. Minimums on everything (protects your credit)
2. Attack the highest interest rate first (usually credit cards)
3. Build a small starter emergency fund (so you don’t relapse)
4. Only then optimize mortgage prepayments vs investing

If you’re a homeowner with a variable rate and also carrying consumer debt, I’m opinionated here: the consumer debt goes first in almost every case.

A quick “buffer” target for 2026

Given the Bank’s own emphasis on uncertainty and trade volatility, I’d rather see households aim for:

• One month of expenses in cash (minimum)
• A plan to reach three months if your income is commission-based, seasonal, or tied to trade-sensitive sectors

What to do before the next rate announcement (January 28, 2026)

Answer first: Use the time between announcements to tighten the parts of your finances you can control: mortgage structure, debt payoff, and where your cash sits.

Here’s a practical checklist you can complete over a weekend:

• Mortgage: Confirm renewal date, current rate type, penalties, and prepayment room.
• Budget: Identify one recurring expense to cancel or downgrade in January.
• Debt: Pick one payoff method (avalanche or snowball) and automate an extra payment.
• Savings: Set up the three-bucket cash system and automate transfers.
• Investing: Write a one-sentence rule you’ll follow if markets drop (example: “I rebalance quarterly; I don’t react to headlines.”)

If you want help, the best time to get advice is before renewal week, not during it.

Where this leaves Canadians heading into 2026

The Bank of Canada’s decision to hold the policy rate at 2.25% is a sign of guarded confidence: inflation is close to target, the labour market is improving (unemployment 6.5% in November), and growth should pick up in 2026—yet the Bank keeps repeating the same theme: uncertainty is high.

So the smart move isn’t betting your household on a fast drop in mortgage rates. It’s building a plan that works if rates stay higher-for-longer and still works if they ease.

If you’re deciding between fixed vs variable, planning a home purchase, or figuring out how much cash to keep versus invest, what would change your life more in 2026: a quarter-point rate cut—or a system that steadily reduces debt and increases savings every month?