Bank of Canada holds key interest rate at 2.25%: What it means for loans
The Bank of Canada announced today that it has cut its key overnight rate by 25 basis points to 2.25%, marking the second consecutive reduction. The Bank Rate now stands at 2.5% and the deposit rate at 2.2%.
The decision reflects ongoing global uncertainty, especially around U.S. trade policy, paired with signs of resilience in major economies and moderate domestic growth. Inflation has remained close to the Bank’s 2% target for over a year, which contributed to today’s rate hold. While most of the attention will focus on the impact on variable mortgage rates, today’s announcement also affects Canadians with personal loans, particularly those with variable rates.
What the Bank of Canada rate hold means for loans
If you already have a variable-rate personal loan, your interest rate will remain unchanged as lenders keep their prime rates steady. While that means no immediate reduction in borrowing costs, it also provides predictability heading into 2026.
For those with fixed-rate personal loans, nothing changes until your term ends. At renewal, you’ll encounter rates that incorporate today’s hold, along with broader market factors such as bond yields and inflation trends.
How personal loans and the Bank of Canada are connected
Personal loans generally fall into two categories: fixed-rate and variable-rate. The type you choose determines how quickly you’ll feel the effects of a rate change.
A variable-rate personal loan is directly tied to your lender’s prime rate, which normally moves in response to adjustments to the overnight rate. With the Bank maintaining its rate today, lenders are expected to keep their prime rate unchanged, meaning your loan rate will stay the same.
Most variable-rate loans maintain a consistent monthly payment, but the split between interest and principal shifts as rates change. Because rates are holding steady, borrowers won’t see any change in how their payments are allocated.
Fixed-rate personal loans, meanwhile, are locked in for the duration of their term. When it’s time to renew or take out a new loan, the Bank of Canada’s policy stance, along with market expectations, will influence pricing. Even if your fixed rate is protected today, staying informed about rate announcements helps you anticipate future borrowing costs.
What this means for other banking products and investments
While today’s rate hold offers stability for borrowers, its implications vary across different financial products. Because lenders typically move their prime rate in response to the Bank of Canada’s overnight rate (and are expected to keep prime steady at 4.45% following today’s announcement), borrowing costs for products such as lines of credit, HELOCs, and car loans should remain unchanged.
This provides short-term predictability for Canadians managing household budgets, especially at a time when domestic demand has been relatively flat and economic growth has shown some volatility due to swings in trade.
Savings and investment returns are also expected to hold fairly steady. High-interest savings accounts and guaranteed investment certificates (GICs) are not likely to see immediate rate changes, since today’s hold does not create the downward pressure that usually accompanies a cut. With CPI inflation tracking close to 2% and underlying inflation around 2.5%, GICs and HISAs continue to offer stable, predictable returns
The Bank of Canada’s next rate announcement is scheduled for January 28, 2026, alongside its full Monetary Policy Report. Until then, lenders are expected to maintain current prime rates, and borrowers with variable-rate products should continue to see their existing rates reflected in upcoming statements.
If you are considering a personal loan, Ratehub.ca’s Loanfinder can help you compare options and find the right fit for your budget and goals.
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Kyla Friel, Content Specialist
Kyla Friel is a content specialist at Ratehub.ca with a background in research-driven content marketing. She’s worked across B2B and consumer spaces, combining SEO knowledge with a passion for clear, engaging writing. She enjoys diving into complex topics and making them accessible to everyday readers.