The Bank of Canada announced on September 2 that its policy interest rate will remain unchanged at 2.25%, extending the holding pattern to seven straight announcements.
Canada’s central bank cited the fluidity of new U.S. tariffs and Canadian counter-measures, as well as the continuing conflict in the Middle East, as reasons for staying the course. Other factors, such as tightening financial conditions and consistently rising bond yields, were also considered in its decision making.
Canada’s economy picked up in the second quarter, with GDP growing 3.3% after a much weaker start to the year. The gains were fairly broad, with consumer spending increasing. What’s interesting to note in the Bank’s report is how housing activity is showing signs of a rebound after several sluggish quarters.
That lines up with recent national housing data from the Canadian Real Estate Association, which showed home sales edging up 0.5% between June and July, marking the fourth consecutive monthly increase. The national MLS® Home Price Index — the most advanced and accurate tool to gauge a neighbourhood’s home price levels and trends — also increased 0.1% month over month, its first increase since November 2024.
According to the Bank of Canada, “Overall, recent data reaffirm Governing Council’s view of a broadening recovery in Canada’s economy. However, uncertainty is high and new US tariffs and threats of further action pose risks to the sustainability of the recovery.”
What you need to know
• Variable Rate Mortgages For Canadian homeowners with variable rate mortgages, the announcement means their borrowing rate should remain unchanged once again.
• Fixed Rate Mortgages Fixed rate mortgage holders won’t see an immediate change either, although the rates available to someone buying a home or renewing a mortgage can still move independently of the Bank of Canada. Since Government of Canada bond yields are an important influence on fixed mortgage pricing, a Bank of Canada rate hold doesn’t necessarily mean fixed mortgage rates are holding, though.
• For Home Buyers The announcement does remove one immediate variable from the equation: lenders aren’t expected to adjust their prime rates as a direct result of the decision, meaning variable mortgage rates should remain relatively steady for the time being (but of course, these days, nothing is certain.)
How do interest rates spur the housing market?
This was the basis of a recent Bank of Canada report that suggests lower interest rates can help bring buyers back into the housing market, particularly when the job market is strong. When borrowing costs fall, home sales can respond fairly quickly.
New housing supply, however, takes longer to catch up. Lower rates can encourage more construction, the report says, but the research found the impact on housing starts can take roughly two years to become significant.
That gap between demand and supply can put additional pressure on home prices. The research suggests interest rates can help stimulate housing activity, but increasing the supply of homes requires measures that go beyond monetary policy.
The federal government has stated it is trying to tackle the supply side more directly. Build Canada Homes, launched in 2025 and now being established as a Crown corporation, is using federal land, financing and partnerships with provinces, municipalities and housing providers to help get more homes built.
What mortgage rates are available right now?
For those looking into getting a mortgage, you may find things are moving in a more expensive direction.
As of September 2, Ratehub.ca lists some of the lowest nationally available mortgage rates around: 3-year fixed at 3.94%, 5-year fixed at 4.09% and 5-year variable at 3.30%.
That five-year fixed rate is one to keep an eye on. Rates dipped below 4% earlier this summer, but rising bond yields have since nudged some fixed mortgage rates back up.
It’s important to note exact rates vary depending on the lender, your down payment, the property, your credit profile, whether the mortgage is insured and other factors.
So, while the Bank of Canada has been in a holding pattern, the mortgage market hasn’t necessarily been standing still.
(Writer’s note: These are examples rather than guaranteed offers. Banks and other lenders regularly provide discretionary discounts, and the rate offered to an individual borrower may be lower or higher. Mortgage rates can also change at any time.)
Is your mortgage up for renewal soon?
For homeowners approaching a mortgage renewal, seven consecutive Bank of Canada holds at least provide some stability on the variable side of the equation.
Many Canadians who originally took out mortgages when rates were exceptionally low are still renewing into a much different borrowing environment. If your renewal is approaching, it’s important you don’t wait for the final few weeks to start exploring your options.
Your current lender may send you a renewal offer, but you aren’t required to accept it without comparing what else is available.
Consider the “4 Ps” when moving a mortgage: prepayment privileges, penalties, portability and payment flexibility.
You’ll also want to find out whether there are fees involved in moving your mortgage and whether a competing lender is willing to cover some of those costs.
Why working with a REALTOR® is important
Your REALTOR® is your personal real estate MVP. While you’re figuring out financing, they can already get to work behind the scenes.
If you’re buying, this means setting up searches for you, attending open houses on your behalf, and asking around to their connections about what might be coming available.
If you’re selling, your REALTOR® can get to work marketing your property right away, getting it ready for staging and compiling documentation, all without severely disrupting your routines.
Thankfully REALTORS® monitor market trends and housing data to make sure, whether you’re buying or selling, your best interests are kept top of mind.
Don’t put off finding your REALTOR® today!
— REALTOR.ca