The Bank of Canada Held Rates. Fixed or Variable Now?

The Bank of Canada announced today that it is holding its benchmark rate steady, which means the base rate stays at 2.75 percent. For anyone with a mortgage coming up or a renewal on the horizon, that decision matters. So let me look at what a held rate means for your mortgage and where fixed and variable sit through the end of 2025.

I am Moe Asgarian, Principal Real Estate Broker in Toronto and ranked number 47 worldwide at RE/MAX. Before we get to the fixed versus variable question, it helps to understand the mood the Bank is reading right now, because that mood is what shapes the decision.

What the Bank is seeing

The latest Bank of Canada survey shows both households and businesses are under financial pressure and hoping for some relief, especially in the middle of this trade war. Most business owners feel a little better than they did a few months ago, but they still see conditions as slow and are carrying real worries. The number of companies who think Canada is heading into a recession actually dropped, from 32 percent at the end of March to 28 percent at the end of June, though that is still higher than in 2024. On the household side, many families are delaying big purchases and long-term plans because the future feels unpredictable, so people are spending less and saving more. Costs are up because of tariffs, and many companies are absorbing part of that to keep customers rather than raising prices, which I do not think is sustainable for long.

Where the Bank stands

The Bank's job is to keep inflation between 1 and 3 percent, and its main tool for that is the interest rate. When the rate is set right, people and businesses can borrow more easily and the economy grows at a sensible pace. Too low and prices can run out of control; too high and you risk a recession because nobody has money to spend or borrow. The latest report put inflation at 1.9 percent in June, a touch higher than the month before but still inside the Bank's target range. The Bank also watches the job market closely, because when people have work they can handle their payments more easily.

Fixed or variable right now

Here is the question everyone is asking. Inflationary pressure still looks high, bond yields are climbing, the trade war continues, and the economy has held up, so many economists believe the Bank is not going to cut rates sharply anytime soon. Let me share one thought first. If all this rate noise and uncertainty is genuinely disrupting your daily life, it may be better to lock in a fixed rate and stop worrying about whether rates went up today. Pick a monthly payment you can comfortably handle and fix it. It may not be the perfect financial move, but sometimes that peace of mind is worth it. And for anyone on a variable rate who is stretched thin, if you think a rate increase would put you in real trouble, seriously consider fixing your rate.

A fixed rate works like insurance

A fixed rate has one clear advantage: your future is set. You know exactly what you will pay, and you know it is manageable. Even if you end up paying a little more than a variable holder, at least you are certain next month's payment will not jump. Just always check what the switch from variable to fixed might cost you, because sometimes the math says it is not worth it. Think of a fixed rate like insurance. Yes, rates might drop after you lock in, but you can chalk that up to security. Someone who buys fire insurance rarely sees their house burn down, but they do not beat themselves up every day for paying for coverage they did not use. If you look at today's rates, they are close to where they were before COVID. These are normal, everyday rates. Do not expect a return to the half-percent COVID era, and do not expect a jump back to 7 percent either. So if you see a fixed rate whose payment is comfortable for you, take it seriously.

A note for anyone renewing

If your mortgage renews next year, the Bank's new report says you may face payments that are 15 to 20 percent higher. Why? The Bank does not look likely to cut rates quickly, and the state of the US financial markets could push bond yields and Canadian fixed rates up. People on 5 year fixed mortgages make up around 40 percent of upcoming renewals, and by 2026 their payments could rise up to 20 percent. The good news is that most of them already stress-tested for this, so it should not be a shock. Many who knew a big jump was coming have paid off a large chunk of their mortgage in advance. The Bank concludes that upcoming renewals are not expected to create a serious financial crisis for borrowers.

The main point is that nobody knows the future, so the best decision is the one you make based on your own finances and your family's situation. I would be glad to walk that road with you. Fill out the form at the bottom of this page or book a free consultation and let's talk it through. Stay well and take care.