Bank of Canada holds rate steady: what it means for your renewal

As a mortgage broker, I understand that these announcements can feel a bit abstract, but they directly influence the rates you pay. Let's break down what this steady rate means for your mortgage renewal, whether you're on a fixed or variable rate, and what steps you can take to ensure you're making the best decisions for your financial future.

Understanding the Overnight Rate and Your Mortgage

The Bank of Canada's overnight rate is a key interest rate that influences all other interest rates in Canada, including those for mortgages. When the Bank of Canada holds its rate steady, it generally signals a period of stability in borrowing costs.

• Variable-Rate Mortgages: For those with variable-rate mortgages, your payments are directly tied to your lender's prime rate, which in turn is influenced by the Bank of Canada's overnight rate. A steady overnight rate typically means your variable mortgage payments will remain stable for the time being. This can be a welcome relief after periods of fluctuation.
• Fixed-Rate Mortgages: Fixed mortgage rates are more closely tied to the bond market, specifically Government of Canada bond yields. While not directly impacted by the overnight rate in the same way variable rates are, a stable economic outlook, which often accompanies a steady overnight rate, can contribute to more predictable fixed-rate offerings.

The Bank of Canada has been on a journey with interest rates, having lowered the policy rate from 5% between June 2024 and October 2025. Since then, they've adopted a "wait-and-see" approach as inflation moderates and the Canadian economy gradually gains momentum.

Your Mortgage Renewal: An Opportunity

Mortgage renewal is a critical juncture. It's not just about signing on the dotted line; it's an opportunity to reassess your financial situation and ensure your mortgage still aligns with your goals. Most Canadians will renew their mortgages multiple times over the full amortization period.

Your lender is required to send you a renewal statement at least 21 days before your current term ends. This statement will outline your remaining balance, the proposed interest rate, payment frequency, and the new term. However, it's important to remember that the rate offered in this initial letter may not be the most competitive.

Here's why you should be proactive:

• Negotiate: You don't have to accept the first offer. Your current lender may be willing to offer a better rate if you demonstrate you've shopped around.
• Shop Around: You are not obligated to renew with your current lender. Exploring options with different lenders and mortgage brokers can uncover better rates and terms that suit your needs. Starting this process a few months before your renewal date is a good strategy.

Fixed vs. Variable: Re-evaluating Your Choice

With the Bank of Canada holding rates steady, it's a good time to revisit the fixed vs. variable rate discussion, especially if your mortgage is up for renewal.

• Fixed-Rate Mortgages: Offer predictability with consistent payments throughout your term. This can be appealing if you prefer stability and want to budget with certainty.
• Variable-Rate Mortgages: Payments can fluctuate with changes in the prime rate. While they can offer lower initial rates, they come with the risk of increased payments if rates rise.

The decision between fixed and variable depends on your personal comfort level with risk and your financial situation. If you're comfortable with potential fluctuations and believe rates might trend lower in the long term, a variable rate could be suitable. If stability is paramount, a fixed rate might be a better fit.

The Mortgage Stress Test at Renewal

However, when you renew your mortgage with your existing lender, the stress test rules typically do not apply, as long as you don't increase your mortgage balance or amortization period. If you decide to switch lenders at renewal, or if you're looking to refinance and take out additional equity, you will likely need to pass the stress test. This is an important consideration when weighing your options.

Navigating BC's Property Transfer Tax (PTT)

While not directly related to the Bank of Canada's rate decision, it's important for BC homeowners to remember the Property Transfer Tax (PTT) if they are considering purchasing a new property. The PTT is a one-time provincial tax paid when real estate changes ownership in British Columbia. It's calculated based on the fair market value of the property at the time of registration.

The general PTT rates are:

• 1% on the first $200,000.
• 2% on the portion between $200,001 and $2 million.
• 3% on the portion between $2 million and $3 million.
• An additional 2% on residential property over $3 million.

There are exemptions available, such as for eligible first-time home buyers or for newly built homes, so it's always worth investigating if your options look. Remember, PTT cannot be rolled into your mortgage, so you'll need to have these funds ready as part of your closing costs.

First-Time Home Buyer Programs: FHSA and RRSP HBP

For those looking to purchase their first home, Canada offers valuable programs like the First Home Savings Account (FHSA) and the RRSP Home Buyers' Plan (HBP).

• First Home Savings Account (FHSA): This relatively new account, launched in 2023, allows eligible first-time homebuyers to save for a down payment with significant tax advantages. Contributions are tax-deductible, and qualified withdrawals for a first home are tax-free. You can contribute up to $8,000 per year, with a lifetime maximum of $40,000.
• RRSP Home Buyers' Plan (HBP): The HBP allows you to withdraw up to $60,000 from your Registered Retirement Savings Plan (RRSP) to buy or build a qualifying home. If your spouse or common-law partner also qualifies, they can withdraw the same amount, for a combined total of $120,000. The funds must have been in your RRSP for at least 90 days before withdrawal. The withdrawn amount needs to be repaid to your RRSP over a 15-year period, starting in the second year after the withdrawal.

You can even use both the FHSA and the HBP for the same qualifying home, provided you meet all the conditions for each.

CMHC Insurance Thresholds

If your down payment is less than 20% of the home's purchase price, you'll generally need mortgage loan insurance, often referred to as CMHC insurance (though other providers exist). This insurance protects the lender in case you're unable to make your mortgage payments.

The minimum

Related mortgage resources

• Explore my mortgage renewal options to review your renewal before signing.
• Explore my refinancing options to compare ways to restructure your mortgage.
• Read Navigating Mortgage Renewal in Metro Vancouver: Smart Strategies to Avoid Rate Shock for a related BC mortgage perspective.