Bank of Canada January 26: Hold Likely; Mortgage Rates at Cycle Lows
The bank of canada interest rate is widely expected to stay at 2.25% on January 26, with markets pricing a near-90% chance of a hold. Inflation sits near 2.4%, growth is soft, and housing activity has cooled. Economists see a long pause that could run through 2026. Mortgage rates in Canada appear at cycle lows, offering a window for buyers and renewers. We explain what a hold means for households, risks from USMCA trade talks, and what to watch next.
Hold at 2.25%: What Markets Are Pricing
Futures imply a near-90% chance the BoC keeps the policy rate at 2.25% this week. A steady stance aligns with inflation near 2.4% and slower demand. Analysts suggest the bank of canada interest rate could remain on hold for most of 2026, barring a trade or inflation shock. See context from BNN Bloomberg for expectations and rationale source.
A hold supports stable bond yields and reduces near-term volatility in Government of Canada curves. Short-term yields often anchor to the policy path. The loonie may stay range-bound if guidance stays cautious. For investors, the bank of canada interest rate pause favours carry strategies in short-duration bonds while leaving room to extend duration if growth slows further.
Mortgage Rates in Canada: Cycle Lows
Lenders indicate 5-year fixed and popular variable options have drifted to cycle lows as funding costs eased. Renewers gain from smaller payment shocks compared with last year. For a practical view on mortgages under a hold scenario, see this Yahoo Finance summary source. We expect modest lender-by-lender differences to persist, so shoppers should compare terms and prepayment options.
We suggest getting a rate hold and stress-testing payments at higher levels. Variable borrowers can review prepayment strategies and accelerate principal while rates are low. Fixed borrowers may consider shorter terms to keep flexibility if the bank of canada interest rate rises later. Ask lenders about portability and refinance fees, which matter if you plan to move or renovate.
Inflation, Growth, and Housing Signals
Headline inflation near 2.4% sits close to target, with core measures easing. Growth is weak, and output gaps appear to be opening. That mix supports a steady bank of canada interest rate today. We watch wage growth and shelter costs for signs of stickiness. If services inflation firms, policymakers could warn that cuts are not imminent, even if overall inflation stays within the target range.
Listings have risen and sales-to-new listings ratios cooled in several major cities. That points to balanced conditions and modest price pressure. Credit growth has slowed as households deleverage. The bank of canada interest rate pause helps reduce payment risk for renewers, but lenders still assess income, debt service, and loan-to-value closely. We expect regional differences to remain large in 2026.
USMCA Trade Risk and Policy Path
USMCA trade risk is the wild card. New U.S. tariffs on key imports could lift input costs and the CPI through goods, food, and autos. A weaker Canadian dollar would amplify those effects. If inflation re-accelerates, the bank of canada interest rate outlook could shift from a long pause to a cautious bias to tighten, even as growth stays soft.
Watch USMCA review milestones, tariff headlines, and energy prices. Track Canadian wage growth, shelter inflation, and credit spreads. The next BoC rate decision language matters as much as the move. Any tilt toward inflation vigilance could lift front-end yields. If trade risks fade, the door reopens to a steady path and possibly lower rates late in 2026.
Final Thoughts
Canada enters this decision with inflation near target, a cooler housing market, and mortgage rates at cycle lows. A hold at 2.25% keeps borrowing costs stable and supports careful deleveraging. For households, we recommend securing a rate hold, budgeting with a payment buffer, and comparing mortgage terms beyond just the headline rate. For investors, a pause favours quality short-duration bonds, with selective duration adds if growth softens. The key swing factor is USMCA trade risk. Fresh tariffs could lift inflation and change the conversation quickly. Stay tuned to guidance and be ready to adjust portfolios and mortgage choices as conditions evolve.
FAQs
What does a BoC hold at 2.25% mean for my mortgage?
A hold stabilizes variable-rate payments and helps keep fixed-rate offers near current cycle lows. Renewers may see smaller payment increases than feared. Compare multiple lenders, review prepayment options, and stress-test payments at a higher rate to build a cushion. Consider portability if you may move within your term.
Could the bank of canada interest rate rise later in 2026?
Yes. If USMCA trade risk leads to tariffs or if inflation re-accelerates, the Bank could pivot hawkish. That would lift bond yields and mortgage rates. For now, markets lean toward a prolonged hold. Watch inflation, wage growth, and policy statements for early clues about any shift.
How does USMCA trade risk affect rates?
Tariffs can raise imported goods costs and push inflation higher. A weaker Canadian dollar could amplify the effect. If inflation stays above target, the Bank may signal a tighter stance. That would pressure bond yields and mortgage rates. Trade calm would support a steady policy and anchored borrowing costs.
Is now a good time to lock in a fixed rate?
If you value payment certainty, locking while rates are at cycle lows can reduce risk. If you expect a long hold or lower rates later, a shorter fixed term can preserve flexibility. Compare total costs, penalties, and prepayment rights before choosing. Consider your timeline, income stability, and risk tolerance.
Disclaimer:
The content shared by Meyka AI PTY LTD is solely for research and informational purposes. Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.
