On Wednesday, December 10, 2025, the Bank of Canada (BoC) announced it would maintain its key policy interest rate at 2.25%.

This decision was widely anticipated by analysts and marks the end of a consecutive easing cycle that saw rates drop four times in 2025. After months of cuts, the Bank has signaled a shift toward a "wait-and-see" approach, aiming to balance a surprisingly resilient Canadian economy against the structural uncertainties of global trade.

For homeowners, buyers, and investors in Metro Vancouver, this decision brings a welcome degree of predictability—but there are important nuances to understand regarding mortgage rates and the year ahead.

Key Highlights: The December Decision

• Policy Rate: Held at 2.25%.

• The Trend: This pauses the series of cuts we saw in September and October.

• Next Announcement: Scheduled for January 28, 2026.

Why the Hold? The Bank’s Governing Council views the current rate as "about the right level" to keep inflation near its 2% target while supporting the economy through a period of structural adjustment. While inflation has moderated to 2.2% (as of October), "core" inflation remains sticky between 2.5% and 3.0%, preventing further immediate cuts.

Additionally, economic data has been stronger than expected:

• GDP Growth: Q3 2025 posted a 2.6% annualized growth rate.

• Unemployment: Dropped to 6.5% in November, showing three consecutive months of employment gains.

What This Means for You

While the "headline" rate is unchanged, the implications vary depending on your position in the market.

1. For Variable Rate Mortgage Holders

Status: Stable. With the overnight rate held, the Prime Lending Rate remains unchanged (roughly 4.45%). This means your monthly payments or interest portion will stay steady. Given the "sticky" nature of core inflation, further cuts to variable rates are unlikely in the very near term.

2. For Fixed Rate Mortgage Holders

Status: Upward Pressure? This is a critical distinction: Fixed mortgage rates are priced based on the bond market, not directly by the Bank of Canada. Following the robust jobs and GDP data, the Canadian 5-year bond yield has actually surged into the 3.0% range.

• Insight: Markets are pricing in a stronger economy, which can exert upward pressure on fixed mortgage rates. If you are renewing soon, do not assume fixed rates will continue to drop just because the Bank of Canada is holding steady.

3. For Home Buyers

Status: A Window of Opportunity. The decision to hold rates reinforces a climate of predictability rather than urgency. We haven't seen the aggressive competition of years past, and this stability gives buyers the time to be thorough.

• Experts suggest this remains a favorable window for first-time buyers. Prices in major centers have moderated, and with inventory levels generally healthy, you have the room to perform due diligence and negotiate effectively.

• Affordability Note: While rates are lower than their peak, the Bank acknowledged that price levels for everyday goods have not dropped—they are simply rising more slowly. Affordability remains a challenge that requires careful budgeting.

Forward Outlook: The "Prolonged Pause"

Looking ahead to 2026, the consensus among major financial institutions (CIBC, TD, RBC, BMO) is that we are entering a period of stability.

• The Base Case: The policy rate is expected to remain at 2.25% throughout most of 2026.

• The Wild Card: The single biggest risk factor cited is the upcoming review of the Canada-United States-Mexico Agreement (CUSMA) in July 2026. Trade friction and tariffs create uncertainty that could swing the economy either way.

Governor Tiff Macklem emphasized that the economy is going through a "structural transition." The Bank is prepared to respond if conditions change materially, but for now, the path forward is one of patience.

Bottom Line

The era of rapid rate cuts appears to be over for now, replaced by a period of stability.

• For Buyers: Use this stability to your advantage. You can make decisions based on your long-term needs rather than reacting to short-term volatility.

• For Sellers: Serious buyers are active, but they are cost-conscious. Accurate pricing remains your most powerful tool to stand out.

• For Everyone: Keep a close eye on your mortgage renewal dates. With bond yields fluctuating, the "lowest rate" strategy requires professional advice more than ever.

Thinking about your next move? Whether you are looking to enter the market, renew your mortgage, or sell your current home, staying organized with your finances is key. If you have questions about how these macro-economic shifts impact your specific neighborhood or property value, let’s connect.

📞 Contact us today for a chat about your real estate goals.