The Bank of Canada held its policy interest rate steady at 2.25% last Wednesday, July 15, marking the sixth consecutive rate announcement with no change. Most major lenders’ prime rates remain around 4.45%.
While the decision to leave rates unchanged was widely expected, the more interesting part of the announcement was the Bank’s change in tone and its outlook for the months ahead.
The Bank said that Canada’s economy is showing signs of improvement, with economic growth beginning to pick up after a relatively weak period.
At the same time, inflation remains a concern. Headline inflation recently moved above 3%, largely because of higher gasoline and energy prices. However, inflation excluding gasoline remains much closer to the Bank’s 2% target.
For now, the Bank appears to be in a holding pattern.
The economy is showing enough improvement that there is little urgency to lower interest rates again, but there is still enough economic and global uncertainty that an increase in rates does not appear necessary either.
Going forward, the Bank will be watching several important factors closely, including whether higher energy costs begin spreading into the prices of other goods and services, whether inflation continues to move back toward the 2% target, and whether Canada’s economic recovery continues to gain momentum.
There are also ongoing uncertainties surrounding U.S. trade policy and global geopolitical tensions, both of which could affect Canadian economic growth and inflation.
What Does This Mean for the Real Estate Market?
For buyers and homeowners with mortgages, the good news is that borrowing costs have remained relatively stable. After several rate reductions in 2025, we have now entered a period where interest rates appear to be settling.
That stability can be helpful for buyers who have been sitting on the sidelines waiting for more certainty. It also makes it somewhat easier to calculate mortgage payments and establish a realistic home-buying budget.
For sellers, improving consumer confidence and greater stability in borrowing costs could gradually encourage more buyers to return to the market.
However, real estate remains very local. Some neighbourhoods and price ranges are moving much better than others, and pricing a property correctly continues to be extremely important.
The Bank of Canada's next interest-rate announcement is scheduled for September 2, 2026.
For now, the message from the Bank seems fairly clear: Canada's economy is improving, but there is still enough uncertainty to justify keeping interest rates right where they are.
As always, we will continue watching interest rates, sales activity and local market conditions and keeping our clients informed about what these changes may mean when buying or selling a home.
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