Bank of Canada holds interest rate at 2.25% for fourth time in April 2026 announcement

The Bank of Canada (BoC) is keeping a firm hold on Canadian borrowing costs, choosing to leave its benchmark interest rate – called the overnight lending rate – untouched at 2.25% for the fourth consecutive announcement.

This trend-setting rate is used to set the prime rate for Canadian lenders and, by extension, variable financial products such as variable-rate mortgages, HELOCs, GICs, and certain types of loans. April marks the seventh consecutive month it has stayed unchanged since the Bank’s last rate cut in October 2025.

As a result of this latest rate hold, the prime rate used by most Canadian banks will stay at 4.45%, and interest rates and payments won’t change for borrowers using these floating-rate products.

The BoC continues to walk a rate-policy tightrope 

Today’s rate hold isn’t a surprise – the Bank has been pretty consistent with its messaging that it’s taking a “wait-and-see” approach to the ongoing volatility impacting global markets – and there’s been plenty of that. The prolonged war in Iran is the major factor influencing global markets right now, and with no clear resolution in sight, it’s hard to gauge the economic implications.

The biggest threat remains the ongoing closure of the Strait of Hormuz, which has caused oil prices to sharply rise. This isn’t just causing pain at the gas pump – it’s also leading to calamity at airports as airlines slash flight routes and pass along surcharges, in efforts to conserve fuel and profit margins. The impact of steeper fuel prices is also starting to bleed into supply chains, impacting everything from trucked-produce, to products made of petroleum byproducts. 

All of this heaps upward pressure onto the pace of inflation growth – and that’s what keeps central bankers up at night. The BoC has a mandate to keep year-over-year inflation growth within a target of 2%. A pace above that threshold would typically prompt the Bank to hike its benchmark rate, in turn making it pricier for businesses and consumers to borrow, and cooling consumption. When inflation is below 2%, it signals a sluggish economy, and the Bank responds by lowering its rate, to encourage more spending and investment.

However, the Bank’s policymakers have stated that they will “look through” the impact rising oil prices have had on inflation, as long as they don’t start to contaminate other spending categories and lead to entrenched higher inflation.

But the Bank isn’t just facing upward inflation pressure – there’s still the question of how erratic US trade policy is impacting the Canadian economy, and whether more surprise tariffs are in store. 

In the opening statement of today’s rate announcement, BoC Governor Tiff Macklem stated that given “uncertainty is unusually elevated”, monetary policy needs to be nimble.

He stated that the Bank’s baseline forecast assumes that oil prices will eventually come back down to $75 USD per barrel by 2027, and that there won’t be any new tariffs imposed on Canada. Should this play out, it would support the current rate hold strategy.

But if things go off the rails, the Bank will be forced to adapt – and rates could go either way.“

If the United States imposes significant new trade restrictions on Canada, we may need to cut the policy rate further to support economic growth,” Macklem stated.

“Alternatively, if oil prices continue to increase, and particularly if they remain elevated, the risk that higher energy prices become ongoing generalized inflation increases. If this starts to happen, monetary policy will have more work to do—there may be a need for consecutive increases in the policy rate.”

I have a variable-rate mortgage. How does this rate hold impact me?

Depending on how you look at it, that the Bank is sticking to a prolonged rate cycle is both good and bad for borrowers. It’s not great news for anyone who’s been waiting for interest rates to drop further, but it also spells out an era of stability for anyone who currently has a variable-rate mortgage, as their interest rate, payment size, or the amount of their payment servicing interest costs, won’t change.

And the variable mortgage rates that are available today are still considerably attractive – the lowest five-year variable term in Canada remains 3.35%. While that’s still well above the rock-bottom pandemic pricing available in 2021 and 2022, it’s much lower than the high 5’s borrowers had to contend with in 2023, and for much of 2024. 

Today, a variable mortgage rate truly offers borrowers the best value – but depending on how the Bank withstands inflation pressures, this could be shorter-lived. It’s important for anyone considering a variable rate to ensure they have the risk tolerance, or the budgetary buffer, to absorb any potential rate increases. 

Will this rate hold impact my fixed mortgage rate?

If you’re already locked into a fixed mortgage term, today’s rate hold will have no impact on what you’re paying; your rate will remain unchanged until you need to come up for renewal at the end of your term. 

And, unlike variable borrowing products, the BoC’s rate policy doesn’t directly influence fixed borrowing rates. It does, however, have an impact on the bond market, which is what lenders use when pricing their fixed rates. While today’s rate hold was widely anticipated by bond investors and already baked into yields, bond yields in general have been elevated since mid-March, and that has caused lenders to hike their fixed-rate offerings. In particular, the Government of Canada five-year bond yield – which underpins five-year fixed rate pricing – has been entrenched in the 3.1% range since oil and war volatility took hold of markets. This has prompted lenders to increase fixed rates between 25 - 40 basis points in recent weeks.

Again, this doesn’t impact anyone already in a fixed-rate mortgage, but it does mean those shopping for a rate are seeing prices rise fast.

The bottom line for anyone currently looking for a mortgage rate is to secure a rate hold as soon as possible to keep access to today’s current pricing; this counts for variable-rate shoppers too, as it will preserve the current spread your lender has to the prime rate. 

What’s next for the sleepy spring housing market?

Canada’s spring real estate market has been cooler than usual – and the culprit is largely the rise in fixed mortgage rates, according to the Canadian Real Estate Association (CREA). Sales were pretty flat on a monthly basis in March, slipping 0.1% from February, and declining by 2.3% from the same time period in 2025.

That borrowing costs have edged up in recent months has thrown another layer of uncertainty into buyers’ decision making. People have already been grappling with economic volatility – first from erratic US tariff policy, and now a sharply rising cost of living, and have been less likely to commit to an enormous financial purchase such as buying a home.

These factors have led CREA to downsize their initial forecast for the 2026 and 2027 markets – though the fact that rates are at a theoretical bottom may incentivize motivated buyers to make their move now, before borrowing costs rise again.

What it all boils down to is the need to wait and see; ultimately the trajectory of borrowing costs (and overall consumer affordability) hinges on how long the Strait of Hormuz remains closed, and just how hot the pressure gets under oil prices. Borrowers, unfortunately, are just along for the ride.

The next Bank of Canada announcement is scheduled for June 10, 2026.

Also read:

• Canadian home sales hold steady in March 2026
• Stable early-spring sales eroded affordability in 10 of 13 markets in March
• Bank of Canada holds rate at 2.25% for third time in March announcement