Bank of Canada Holds Rate at 2.25% — July 15, 2026

Tanya Toye • July 15, 2026

The Bank of Canada announced today that it is holding its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%. The tone of today's announcement is notably more optimistic than previous months. Here's what's changed and what it means for you.

What the Bank of Canada Said

Signs of Improvement

For the first time in several months, the Bank is signalling that Canada's economy is showing real signs of improvement. Growth is picking up, and inflation is projected to ease gradually from its recent spike. While risks remain, particularly around the Middle East conflict and U.S. trade policy, the overall tone has shifted toward cautious optimism.

The Global Picture

Since the April Monetary Policy Report, global economic prospects have been dampened by higher oil prices from the Middle East conflict. However, the build-out of artificial intelligence is now supporting economic activity in a growing number of countries. Oil prices are still below their April peak, though the situation in the Middle East remains volatile.

The U.S. economy is growing at about 2.5%, driven by strong consumer spending and booming AI investment. China continues to expand on the back of robust exports. Europe has been weighed down by high energy prices but is expected to strengthen in the second half of the year if prices ease as anticipated. The Bank projects global GDP growth will slow to 2.75% in 2026 before recovering to around 3.25% in 2027 and 2028.

The Canadian Economy

Canada's GDP data over the past year has been choppy. Growth stalled as the economy adjusted to new tariffs, high uncertainty, and slower population growth. But there are now clear signs that growth has resumed in the second quarter, estimated at 2.5%. The Bank acknowledges this largely reflects the unwinding of temporary factors, but sources of growth appear to be broadening.

Consumer spending looks solid. Housing activity has been weak but is showing signs of stabilizing. Export growth has resumed and is expected to strengthen. Business investment is projected to pick up modestly, boosted in the near term by the oil and gas sector. More businesses also report they are finding ways to navigate through trade uncertainty.

Following GDP growth of 0.7% in 2026, the Bank projects growth of 1.8% in both 2027 and 2028. The unemployment rate was 6.5% in June, continuing to hover in the 6.5% to 7% range it has maintained since late 2024.

Inflation

CPI inflation rose to 3.2% in May, mainly due to higher gasoline prices linked to the Middle East conflict. Excluding gasoline, inflation was just 2.2%, and core inflation measures remained close to 2%. That is an important distinction: the inflation we are seeing is largely an energy story, not a broad cost-of-living surge.

Near-term inflation expectations remain sensitive to gasoline prices, but longer-term expectations are well anchored. The Bank expects CPI inflation to stay elevated in June before easing gradually in the coming months, returning to around 2% in early 2027. Inflation is then forecast to average around 2% in 2027 and 2028.

Why the Bank Held

Governing Council judged that the current rate of 2.25% remains appropriate to sustain the economic recovery and bring inflation back to target. Uncertainty is still high, and the Bank remains prepared to adjust monetary policy as needed. The commitment to price stability remains firm through this period of global upheaval.

What This Means for Mortgage Holders and Buyers

A rate hold means no immediate change to variable-rate mortgage payments or home equity lines of credit (HELOCs) tied to the prime rate. The prime rate remains at 4.45%.

Today's announcement carries a more positive signal than we have seen in recent months. The economy is recovering, core inflation is near target, and the Bank's language suggests the path forward is one of gradual improvement, not further tightening. For borrowers, this is an encouraging environment to plan ahead.

If you are renewing a mortgage in the coming months, thinking about purchasing, or weighing your fixed vs. variable options, now is a good time to have that conversation. The landscape is shifting, and being prepared puts you in the best possible position.

The next scheduled rate announcement is September 9, 2026 .

As always, every borrower's situation is unique. If you have questions about how today's decision affects your mortgage, reach out. We would love to help you navigate your options.

Information sourced from the Bank of Canada's official press release dated July 15, 2026.

Tanya Toye

Mortgage Broker

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Stress-Testing Your Mortgage Affordability: Why It Matters

By Tanya Toye • July 8, 2026
Buying a home is one of the biggest financial commitments you’ll ever make. That’s why lenders want to be sure you can handle your mortgage payments—not just today, but also if interest rates rise in the future. This is where the mortgage stress test comes in. Many Canadians hear the term but aren’t entirely sure what it means or how it affects them. Let’s break it down in plain language. What Is the Mortgage Stress Test? The stress test is a rule introduced by the federal government that requires all mortgage applicants to qualify at a higher rate than the one they’ll actually pay. Currently, you must qualify at the greater of your contract rate + 2% or the benchmark qualifying rate (set by the Office of the Superintendent of Financial Institutions). For example: If your lender offers you a 5-year fixed mortgage at 5.25%, you must show you could still afford the payments at 7.25% . Even if rates don’t rise that high, the stress test ensures you won’t be overextended if they do. Why Does It Matter? The stress test protects both borrowers and lenders by: Preventing over-borrowing : It ensures you don’t take on more debt than you can realistically handle. Preparing for rate hikes : With interest rates fluctuating, it’s a safeguard against sudden increases. Strengthening financial stability : It lowers the risk of defaults, protecting the housing market as a whole. While it can sometimes feel like a barrier—reducing the amount you qualify for—it’s ultimately designed to keep you from becoming “house poor.” How Does It Impact Buyers? The stress test can significantly affect your homebuying budget. For example, without it, you might qualify for a $600,000 mortgage, but with the stress test applied, you may only qualify for $500,000. That doesn’t mean your dream of homeownership is out of reach—it just means you may need to adjust expectations or explore other strategies, such as: Increasing your down payment Paying down existing debts Considering alternative lenders who may have different qualification standards Why Work With a Mortgage Professional? Every lender applies the stress test, but not every lender views your application the same way. An independent mortgage professional can: Shop multiple lenders to find the best fit Run affordability scenarios at different rates Help you understand how much house you can truly afford—without stretching your finances too thin The Bottom Line The mortgage stress test isn’t meant to stop you from buying a home—it’s there to protect you from financial strain down the road. By understanding how it works and planning ahead, you can make smarter choices and buy with confidence. If you’re thinking about purchasing a home, refinancing, or simply want to know how the stress test affects your options, connect with us today. We’ll help you stress-test your budget and find the mortgage solution that works best for you.

Don’t Overlook Mortgage Penalties When Breaking Your Term Early

By Tanya Toye • July 8, 2026
When most borrowers shop for a mortgage, the focus is usually on one thing: the interest rate. While the upfront rate is certainly important, it’s only one piece of the puzzle. One of the most expensive surprises homeowners can face is discovering the cost of breaking their mortgage before the end of the term. Whether it's due to a move, divorce, job relocation, refinancing opportunity or another life change, mortgage penalties can vary dramatically depending on the lender and product selected. This is why understanding prepayment penalties should be a key part of the mortgage conversation from the very beginning. Variable vs fixed penalties Variable-rate mortgages generally offer more flexibility when it comes to breaking a mortgage early. Most Canadian lenders calculate the penalty for breaking a variable-rate mortgage as three months’ interest. While no one enjoys paying a penalty, the calculation is straightforward and relatively predictable. Fixed-rate mortgages are different. Most fixed-rate mortgages require borrowers to pay the greater of three months' interest or the interest rate differential (IRD) when breaking the mortgage before maturity. Depending on the lender, the penalty calculation may change over the course of the term and the IRD often becomes the dominant factor in determining the cost of breaking a mortgage early. The IRD penalty calculation compares your existing mortgage rate to the lender's current posted rate for a similar remaining term. This is where things become more complicated. Many borrowers receive discounted contract rates that are lower than the lender’s posted rates. However, lenders often use posted rates as part of their penalty calculations. As bond yields push fixed mortgage rates higher, some lenders also adjust posted rates, creating a disconnect that can significantly influence the size of an IRD penalty. In other words, two mortgages with similar rates today could produce very different penalties tomorrow if they need to be broken early. Product selection is more important than upfront rate Mortgage selection should never be based solely on the lowest advertised rate. Features, flexibility, portability options, prepayment privileges and penalty calculations can all have a meaningful impact on the overall cost of borrowing. It's also one of the reasons borrowers should stay connected with their mortgage broker throughout the life of their mortgage. Many homeowners assume the conversation ends once the mortgage funds, but ongoing communication can be incredibly valuable. Sharing your mortgage renewal details when talking to a mortgage broker allows them to better monitor your mortgage moving forward. Knowing your current rate, term maturity date and product structure helps them identify opportunities, anticipate challenges and provide guidance if your circumstances change before your next renewal. A mortgage is not just a rate – it's a long-term financial strategy. Understanding how penalties work today could save you thousands of dollars tomorrow. Before choosing a mortgage product, make sure you’re looking beyond the interest rate and considering the flexibility you'll have if life doesn't go exactly as planned. Wondering which mortgage product is right for you? I’m here to help explain all your options. 604-788-8693 | tanya@tanyatoye.ca