Bank of Canada leaves overnight rate unchanged at 2.25% at the March meeting
Steady state from the Bank of Canada? One might think so, with rates unchanged at 2.25% at March’s policy meeting, but the truth is a little more complex.
I heard PM Carney’s speech and it was spot on the money. And now with an ongoing conflict in the middle east it is problematic for anyone trying to gauge the future, including the Bank of Canada. They have stayed the course on rates simply because they have little other choice. According to the Bank, inflation pressures worldwide have increased due to turmoil in energy and the financial markets while at the same time the Canadian economy continues to cool.
With rates kept at 2.25% the Bank has flexibility to move either way as needed. What the next move will be is the million dollar question although I’d expect it will be modest, perhaps a 1/4 point either way. Here’s an excerpt from the Bank:
CPI inflation eased further to 1.8% in February, down from 2.3% in January. CPI inflation excluding changes in indirect taxes as well as core inflation measures have also come down and are all close to 2%. Food inflation slowed in February but remains elevated. The sharp increase in global energy prices has led to increases in gasoline prices, and this will push up total inflation in the coming months.
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. 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. The Bank is committed to ensuring that Canadians continue to have confidence in price stability through this period of global upheaval.
The lowest available April 2026 rates are:
1-year fixed insured 4.69%
2-year fixed insured 4.24%
3-year fixed insured 3.89%
4-year fixed insured 4.09%
5-year fixed insured 3.75%
5-year variable insured 3.30%
Is the mortgage stress test still a thing in 2026? Yes it is, and with the higher rates we’ve seen, it’s even harder to qualify for a mortgage. The rules require you to qualify at either 2% above the rate your lender is offering you or 5.25%, whichever is higher.
Being forced to qualify at the higher stress test rate causes the principal portion of your monthly mortgage payment to shrink, lowering the maximum amount you’ll be allowed to borrow for your mortgage. But the rate you’ll actually pay once you buy is the rate you are offered by your lender. Your monthly payments will be calculated from this lower rate, not the stress test rate. As a result your monthly mortgage bill will be smaller too.
The stress test has been quite unpopular so the federal government has rolled out several new changes to make it easier to buy a home. They are now offering a first time buyer’s credit of $5000, and an increase in withdrawals from your RRSP to $35,000.
In addition existing borrowers are no longer required to re-qualify at the stress test rate when they renew or refinance their mortgages. This will allow borrowers some flexibility if they want to choose a different lender as they are no longer under the pressure of qualifying at an additional two percentage points.
If you’re looking for mortgage info or help please reach out.
