The Bank of Canada announced on January 28, 2026 no change to the overnight rate, which remains at 2.25%. Making the prime lending rate 4.45%. After a long easing cycle that included nine rate cuts between mid-2024 and late-2025, the Bank is now firmly in wait-and-see mode.
While the decision itself wasn’t a surprise, the language and tone of the announcement matter just as much—especially for Canadians with mortgages or those planning to buy in 2026.
A Shift From Cutting to Caution
The Bank of Canada’s latest rate announcement made it clear that monetary policy is now focused on balance rather than stimulus. Inflation has come down a lot from its peak, but it hasn’t gone away. The economy is still adjusting to higher long-term costs linked to global supply chains, geopolitical tensions, and slower productivity growth.
In its statement, the Bank noted that the current policy rate is appropriate as long as the economy evolves broadly in line with its outlook, emphasizing heightened uncertainty and the need to closely monitor risks. In plain terms, this means:
- The Bank is not rushing into further rate cuts
- Future moves will be data-dependent
- Inflation control remains the top priority
For borrowers hoping for lower rates in the near term, this suggests a longer wait ahead.
What This Means for Variable-Rate Mortgages
Because variable mortgage rates are closely tied to the Bank of Canada’s overnight rate, today’s announcement suggests stability rather than sharp declines in the near term.
Variable rates remain attractive because:
- They are still priced lower than fixed rates
- They offer flexibility, including lower penalties and the ability to switch into a fixed rate without penalty at most lenders
However, the Bank of Canada’s cautious stance means borrowers shouldn’t assume automatic savings ahead. If inflation remains sticky or economic data surprises to the upside, further rate cuts could be delayed—or modest.
What About Fixed Rates?
Fixed mortgage rates don’t move with the Bank of Canada’s latest rate announcement. Instead, they’re driven by bond yields, which have been relatively stable so far in early 2026.
The Bank’s announcement supports the idea that:
- Fixed rates are likely to stay within a fairly tight range in the short term, without major ups or downs
- Any meaningful decline will likely depend on softer economic data or falling bond yields later in the year
For borrowers who value payment certainty, fixed rates continue to offer peace of mind—though at a slightly higher cost compared to variable options.
What Should Borrowers Do Now?
There’s no one-size-fits-all answer, but this rate decision reinforces a few key ideas:
- Variable rates make sense for borrowers comfortable with some uncertainty and who value flexibility
- Fixed rates remain appealing for those who prioritize predictability and long-term budgeting
- Timing the market perfectly is less important than choosing a mortgage that fits your financial goals and risk tolerance
The Bank of Canada’s latest rate announcement confirms that the era of rapid rate cuts is likely behind us. With the overnight rate holding at 2.25% and policymakers focused on stability, 2026 is shaping up to be a year of steady conditions rather than dramatic moves.
As a borrower, understanding how these signals affect your mortgage strategy can make a meaningful difference—whether you’re renewing, buying, or refinancing.