In its fifth scheduled announcement of 2026, the Bank of Canada held the target for the overnight lending rate at 2.25%. This marks the sixth consecutive hold to interest rates since October of last year.

Canada’s economy is turning a corner. After a stretch of sluggish growth and stubborn price pressures, inflation is projected to ease gradually from its recent spike. However, the path forward is not without obstacles. The war in the Middle East and shifting U.S. trade policy continues to cast uncertainty over the outlook. Still, for Canadians watching from the sidelines, including those with home buying or selling plans on hold, the improving fundamentals offer cautious optimism.

“Recent indicators point to continued solid consumer spending. Housing activity, which has been weak, looks to be stabilizing. Export growth has resumed and is expected to continue to strengthen, albeit along a lower path. Business investment is picking up, boosted in the near term by the oil and gas sector. Although the Canada-US-Mexico Agreement is now subject to annual reviews, more businesses report they are finding ways to navigate through the uncertainty. Government spending also contributes to higher economic activity over the projection,” said Tiff Macklem, Governor of the Bank of Canada, in a press conference with reporters following the announcement.

“Overall, our growth outlook is similar to our April forecast, but the data we have received since April have increased our confidence that the economy is indeed working its way through this period of global upheaval.”

In May, the Consumer Price Index (CPI) rose 3.2% year over year, up from 2.8% in April and the highest reading since January 2024. Gas prices, driven sharply higher by conflict in the Middle East, were the largest contributor to the increase. However, economists note that these inflationary pressures have been largely contained to energy and have not spread broadly to goods and services, an encouraging sign that underlying inflation remains in check. While near-term inflation expectations tend to move with prices at the pump, longer-term expectations remain well anchored, giving the Bank of Canada room to hold its course. Meanwhile, the labour market has shown similar strength, with the unemployment rate dipping to 6.5% in June. GDP growth is expected to improve, with growth projected to 2.5% in Q2 2026. 


 

Rates stable as pandemic-era mortgage renewal wave nears end

With the overnight rate holding steady, Canadians obtaining or renewing a mortgage can count on another few months of certainty, a welcome reprieve for those coming off ultra-low rates.

Over the next year, the final wave of five-year, fixed-rate mortgages secured during the pandemic will come up for renewal, accounting for roughly 12% of all outstanding mortgages, according to the Bank of Canada.1 On average, these borrowers can expect monthly payments to rise by 15%.

“The over-blown pandemic mortgage renewal scare is all but over and most Canadians have weathered the storm. By the middle of next year, virtually all borrowers facing significant payment increases will have renewed. While most will be able to manage the adjustment, a small subset of homeowners face a more challenging road, particularly in higher-priced markets where home prices have taken a more sustainable dip in recent years,” said Phil Soper, president and CEO, Royal LePage.®

“That said, the numbers remain small enough that we do not expect a meaningful impact on the broader housing economy. National mortgage delinquency rates remain low by historical standards, meaning that most borrowers have been able to absorb higher payments without falling behind and have been able to successfully refinance. Rising incomes and a resilient labour market continue to work in homeowners’ favour. And, strict mortgage stress test rules mean borrowers would have qualified at a much higher rate than they actually paid when they took out those mortgages.”

According to the Royal LePage House Price Survey and Market Forecast, the aggregate2 price of a home in Canada decreased 1.4% year over year to $814,900 in the second quarter of 2026. On a quarter-over-quarter basis, however, the national aggregate home price remained flat, increasing a modest 0.2%.

The Bank of Canada will make its next interest rate announcement on September 2nd, 2026.

Read the full July 15th report here. Want to know more about how the overnight lending rate works? Read our explainer on how the Bank of Canada uses this financial tool.

1Households, Financial Stability Report—2026, May 2026, Bank of Canada

2Aggregate prices are calculated using a weighted average of the median values of all housing types collected. Data is provided by RPS Real Property Solutions and includes both resale and new build.