Bank of Canada holds rate at 2.25% for third time in March 2026 announcement

Borrowers can count on continued rate stability this spring, as the Bank of Canada chose to keep its benchmark interest rate – which is in turn used as the pricing floor for prime-based borrowing products – unchanged. The overnight lending rate remains at 2.25%, where it has sat for six consecutive months, following the central bank’s last rate cut in October.

The prime rate set by Canada’s consumer lenders will stay unchanged at 4.45%, and there’s no movement expected for the lowest five-year variable mortgage rate, which is currently 3.35%. This rate also impacts pricing for HELOCs, variable-rate mortgages and some loans, as well as passive investment products such as GICs and high-interest savings accounts.

While today’s rate hold was widely anticipated by economists and markets, the Bank is having to make its rate decisions against an increasingly complicated macroeconomic backdrop. While the impact of US tariffs have largely stayed contained to a few specific sectors, the latest labour force report revealed Canada lost 84,000 jobs in February. The overall economy grew just a meagre 1.7% in 2025 – its slowest annual pace since 2020. 

And of course, the emergence of the war in Iran has heaped new geopolitical pressure onto policymakers, as spiking energy prices threaten to re-inflame inflation growth, a development that could force the Bank back into a rate-hiking cycle, despite a weaker economy at home – also known as the dreaded stagflation. 

However, the Bank was clear it won’t be rash to leave its current holding pattern, stating it’s “too early to assess the impact of the conflict in the Middle East on growth in Canada.” policymakers are waiting to see prolonged evidence that higher inflation has become entrenched before making a move.

“Against this overall backdrop, Governing Council decided to maintain the policy rate at 2.25%. With recent data pointing to weaker economic activity and uncertainty elevated, risks to growth look tilted to the downside. At the same time, inflation risks have gone up due to higher energy prices.” states the Bank’s press release accompanying the rate announcement.

“We will continue to assess the impact of US tariffs and trade policy uncertainty, and how the Canadian economy is adjusting. We are also monitoring the unfolding conflict in the Middle East closely and assessing its impact on growth and inflation. As the outlook evolves, we stand ready to respond as needed.”

Overall, the Bank expects the Canadian economy to grow modestly, as it continues to adjust to US tariffs and trade, but that growth will be weaker than they initially expected in January.

What does today’s rate hold mean for variable mortgage borrowers?

While a prolonged rate hold means zero relief for home shoppers holding out for lower rates, those who already have floating-rate mortgages will continue to benefit from continued stability; depending on the type of variable-rate mortgage you have, neither your monthly payment, nor the portion of that payment that services interest, will change.

And today’s variable-rate pricing isn’t terrible news for those currently weighing their rate options, either; at 3.35% variable rates remain the lowest they’ve been since the summer of 2022, following nine cumulative rate cuts from the Bank between June 2024 and October 2025. Overall, the benchmark for variable rates has decreased 275 basis points from its peak of 5%, where it had remained throughout 2023 and the first half of 2024.

However, given there are factors – such as forecasted inflation pressure – that could force the Bank to hike rates in the future, it’s important that anyone selecting a variable rate either has the risk tolerance and budget room to withstand an increase, or has a plan to potentially convert their rate to a fixed-rate option, should rates heat too quickly. It’s also important that anyone considering a variable rate act swiftly to secure the current spread to prime offered by lenders; while variable rate prices themselves are dependent on the Bank and prime rates, lenders can tweak their the discount or premium to prime that their rates are based on to protect their margins.

Rising bond yields are pushing fixed mortgage rates higher

Fixed mortgage rates, while not directly impacted by the Bank’s rate decisions, are nevertheless feeling upward pressure, as it becomes less likely that both the Canadian and American central banks will lower rates in the near future. 

Bond investors are getting increasingly anxious that the Iranian war will last longer than expected, and that higher energy costs will linger, further stoking inflation. This increased risk and fear of rising costs has prompted investors to sell their bonds, further driving yields up (bond yields and prices move inversely to one another). This has caused the US 10-year Treasury – considered the global benchmark for yields – to rise above the 4.2% mark, influencing the Government of Canada five-year yield (which lenders largely use to set their five-year fixed rate pricing) to rise above the 3% mark earlier this week. 

That’s led to lenders increasing their fixed mortgage rates; the best insured five-year fixed is now 3.94%, compared to 3.79% in February - that’s an increase of 15 basis over just a few weeks.

What’s in store for Canada’s housing market?

The latest data from the Canadian Real Estate Association (CREA) showed the real estate market was largely stuck in neutral in February, with home sales down 1.3% from January, and by over 8% on an annual basis. Home prices have also softened, down by 4.8% to an average of $663,828 from the same time period in 2025.

The same  macro pressures – such as fear of job loss and tariff pressures – that impacted buyer demand last year are still very much present and will continue to put a damper on demand. However, there are plenty of pent-up first-time buyers who’ve been waiting for a price or interest rate bottom to get into the market; today’s cooler pricing and competitive mortgage rates could offer the incentive for many to finally come off the sidelines.

Overall, though, market activity will remain limited to buyers who are strongly motivated by either life circumstance, price, or both, without the promise of rate cuts to drive an onslaught of market activity.

Also read:

• Bank of Canada holds target interest rate at 2.25% in January 2026 announcement
• Canada’s housing market remained in neutral in February
• What is Canada’s overnight lending rate?
• Understanding Canada’s prime rate
• Canada’s housing affordability: Monthly snapshot