Interest Rate Held at 2.25%: What It Means for Canadians

On January 28, 2026, the Bank of Canada decided to maintain its policy interest rate at 2.25%, in line with expectations from economic observers and previous decisions from December: an anticipated status quo reflecting controlled inflation and an economy in stabilization phase.

What is the Policy Interest Rate?

The policy interest rate, or overnight rate target, is the Bank of Canada's main monetary policy tool. It influences short-term interest rates, particularly those for variable-rate mortgages. This rate is set at eight predetermined dates per year, including January 28, 2026.

Why Maintain it at 2.25% Today?

• Inflation near the 2% target: the Consumer Price Index (CPI) has remained close to target for over a year, and underlying inflation measures are deemed under control.
• Modest but stable growth: despite 2.6% GDP growth in the third quarter, the Bank anticipates weakness in the fourth quarter, particularly due to slowing exports.
• Rate neutrality: at 2.25%, the rate is considered "about right" to keep inflation near target while supporting the economy.

Real and Significant Impacts for Canadians

1. Variable-Rate Mortgages

Maintaining the policy rate means variable-rate mortgage payments remain stable. Unlike previous increases, homeowners won't see their payments rise, providing relief for household budgets. For waiting buyers, it's a less volatile environment, even if rates aren't dropping.

2. General Economy

A stable rate supports consumer and business confidence. Households can plan expenses without fearing sudden increases in borrowing costs, which encourages consumption. Businesses benefit from a predictable financing environment, encouraging modest but steady investment.

3. Real Estate Market

The monetary status quo keeps mortgage rates at a relatively low level. This supports demand in the residential market, particularly for variable-rate borrowers or those looking to renew their mortgage soon. The risk of slowdown is limited, provided the rate remains stable.

Future Outlook

The Bank of Canada indicated it's ready to adjust the rate if economic data evolves, particularly in case of rising inflation or marked growth recovery. For now, markets anticipate prolonged stability, with a possible increase late in the year if inflation picks up.

Practical Tips for Homeowners and Future Buyers

• Take advantage of current stability: if you have a variable-rate mortgage, the rate hold gives you room to save or prioritize paying off other debts.
• Compare fixed rates: if you're considering refinancing or buying, compare fixed-rate offers. Even if the policy rate is stable, fixed rates may be slightly higher but offer long-term security.
• Plan for the medium term: prepare for a possible increase late in the year. Establish a budget considering a 0.25% to 0.50% increase to anticipate potential hikes.
• Stay informed: monitor future Bank decisions (notably March 18, 2026) and inflation data to quickly adapt your financial strategy.

Conclusion

The Bank of Canada's decision to maintain the policy rate at 2.25% on January 28, 2026 is a prudent move, reflecting controlled inflation and an economy in stabilization. For homeowners and future buyers, this means a certain peace of mind: no short-term payment increases, a supported real estate market, and an environment conducive to planning. However, remaining vigilant to economic developments remains essential.