Bank of Canada Holds the Line: What the January 28 Rate Decision Means for Mortgages and Real Estate
- Simon Bilodeau
- 28 minutes ago
- 6 min read
The Bank of Canada kicked off 2026 by doing exactly what most forecasters expected: it kept the target for the overnight rate steady at 2.25 %, leaving the prime rates used to price variable‑rate mortgages unchanged at 4.45 %. Markets had assigned roughly an 89 % probability to a hold, and Governor Tiff Macklem had already signalled that policy is “about the right level”. For borrowers, this means your variable or adjustable‑rate mortgage payments stay the same in the short term. Fixed‑rate mortgages, however, follow a different tune — they’re driven by bond yields, which can move even when the central bank stands still.
Why the Bank Stayed Put
Canada is in a strange economic moment: headline inflation ticked higher in December even as growth momentum slowed and the jobless rate crept up. The Consumer Price Index rose 2.4 % year over year in December. But that increase mostly reflected a base‑year effect from a temporary federal GST/HST holiday in late 2024, which lowered prices then and makes today’s prices look higher by comparison. Statisticians expect this one‑off tax effect to wash out in coming months. Food inflation remains elevated, with grocery prices up 5 % from a year earlier and restaurant prices surging 8.5 %, but gasoline prices are falling. For many families, this inflation still feels high even if rent, televisions and cell‑phone plans are getting cheaper; grocery costs still dominate budgets.
Rent is getting cheaper in the Lower Mainland and in some regions across British Columbia because there are fewer foreign students, temporary workers and immigrants. Housing geared to rentals continues to be built, thanks to the Canada Mortgage and Housing Corporation’s rental construction program, so rent may not rise for some time. This could change quickly if immigration policy shifts or when new construction stops outpacing population growth. New condo sales have fallen roughly 60 % from previous years, implying fewer new projects in the years ahead. Builders need to pre‑sell 60 % to 80 % of units to secure financing. Combined with stagnant rents, that means many rental projects could stall. Even though we structurally need more housing, we may not be building enough in the coming years.
Meanwhile, the labour market continues to add jobs even as unemployment rises. Statistics Canada’s December survey shows the economy added 8 200 jobs, mostly full‑time positions, but the unemployment rate jumped to 6.8 % because more people entered the labour force. When the labour force grows faster than job creation, the unemployment rate goes up. Gains were concentrated in health care, social assistance, construction and other services, while professional and food‑service sectors shed jobs. Wage growth is cooling: average hourly earnings rose 3.4 % year over year in December, down from 3.6 % in November. These mixed signals, slowing growth but still‑solid job creation, give the Bank of Canada room to watch how previous rate cuts ripple through the economy before making its next move. Rate changes take three to twelve months to show up in the data, so we’re still not seeing the full effects of recent cuts. The slowdown in wage growth also suggests employers don’t feel pressure to pay more and many job seekers may be willing to accept lower pay just to get a job.
Mortgage renewals will also hit their peak this year after the record originations of 2021. Many borrowers will see their payments jump by 20–30 % in 2026. However, people who bought in late 2022 or 2023 on three‑ or four‑year terms will renew at lower rates and see lower payments. Overall, payments will rise about 10 % across the mortgage market. This is manageable in aggregate, but it will still dampen household spending, which drives much of Canada’s economy. Trade policy will continue to influence economic performance.
Real Estate: Buyers Have Time, Sellers Have Patience
If you’re thinking about buying a home in 2026, the current backdrop may feel uneasy, but conditions are quietly tilting in your favour.
Sales Were at a 20‑Year Low in 2025, Yet Listings Hit a Record
The Greater Vancouver market illustrates how unusual 2025 was. Only 23 800 homes sold in Metro Vancouver last year, a 10.4 % drop from 2024 and the lowest annual total in more than two decades. Meanwhile, 65 335 properties were listed on the Multiple Listing Service, the highest annual total since the mid‑1990s. By year‑end there were 12 550 active listings, 14.6 % more than in December 2024 and about 35 % above the 10‑year seasonal average. Sellers showed up even though buyers didn’t. This imbalance means buyers have a good selection and sellers need to price strategically.
Nationally, a similar dynamic unfolded. Scotiabank reports that national home sales fell 2.7 % from November to December 2025 and were 10.1 % below their recent peak. New listings also eased, but not as quickly, pushing months of inventory up to 4.5. The national MLS® Home Price Index fell 4 % year over year. Eighteen of the 31 major markets tracked were balanced or favoured buyers. In short, Canada closed 2025 in a balanced market — neither buyers nor sellers have the upper hand. That balance is likely to persist this year as both groups wait for clearer signals.
What This Means for Today’s Buyers
No rush, but opportunity: With sales at multi‑decade lows and inventory elevated, buyers can take time to find the right property without bidding wars. Mortgage rates have already fallen nearly a percentage point since early 2025, improving affordability.
Motivated sellers: Record listing volumes suggest some homeowners need or want to sell. If sales remain sluggish, price reductions or incentives may appear, especially for properties that have lingered on the market.
Be realistic: The national price index is still about 30 % above pre‑pandemic levels. We’re seeing a controlled pullback, not a crash. Budget for the long term rather than hoping for rock‑bottom prices. Prices may already be near the bottom in some segments and markets, so waiting much longer may not be wise.
Looking Ahead: Risks and Opportunities
The market consensus suggests the Bank of Canada will hold rates through most of 2026. Money markets are starting to price in a modest hike late in the year or early next year. Trade negotiations with the United States introduce uncertainty; if tariffs bite more deeply, policymakers might act again. For now, the Bank has emphasized that inflation is near target and it is prepared to respond if the outlook changes. Personally, I believe the Bank of Canada may need to cut once or twice this year, but if it doesn’t I won’t be surprised. It is unlikely that BoC rates will rise before 2027 unless trade policy with the US reverts to pre‑Trump norms. Fixed rates may move earlier unless the Bank intervenes in the bond market.
What Does This Mean for Mortgages?
Variable‑ and adjustable‑rate mortgages: No immediate change; your payment stays the same.
Fixed‑rate mortgages: Keep an eye on bond yields. If economic data softens and yields fall, fixed rates could drift lower even without a policy cut. Conversely, if markets fear inflation, fixed rates can rise even when the Bank is on hold. My forecast (as reliable as a weather forecast) is that rates could dip in the spring, which would be a good opportunity to convert a variable mortgage to a fixed one. For purchasers, rates may not move enough to justify waiting; it’s often better to buy earlier than wait and compete with the spring crowd.
Renewals and pre‑approvals: If you have a renewal or plan to buy this spring, consider securing a pre‑approval now. Competitive rates are available, and locking one in gives you protection if rates tick up later, even if that’s unlikely.
Final Thoughts
We’re not out of the woods yet. Canada’s economy is sending mixed messages: inflation is slightly above target due to temporary tax effects; job growth persists, but unemployment is creeping up; and housing markets are balanced with low sales but high inventory. In this environment, a hold from the Bank of Canada makes sense. If you’re contemplating a purchase, conditions are favourable: you have options, you’re not racing the clock, and rates are competitive. This is a great time for buyers to enter the market. For now, enjoy the stability, but stay tuned.
If you’re approaching a renewal, considering a purchase, or simply want to understand how these changes affect your situation, you can book a short meeting here to go over your options:
Simon Bilodeau and Gina Lopez
604-828-9864
Simon Bilodeau is a mortgage broker, financial writer, and co-founder of RefinanceBC. He specializes in translating economic trends into clear mortgage strategies for BC homeowners. Often featured on Radio-Canada and CBC, Simon is known for honest, data-driven advice delivered in plain language. He works alongside his wife Gina, forming a bilingual team serving clients across the province.
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