Bank of Canada Holds Rates at 2.25%, But Hikes Predicted for Later This Year

What this means for you: Your borrowing costs are safe for now, but you should prepare your budget for higher interest payments before the end of 2026.

The Bank of Canada has kept its key interest rate steady at 2.25%. This is the fourth time in a row the central bank has left rates unchanged. While this offers a break for homeowners with variable-rate mortgages, the outlook for the rest of the year is shifting toward higher rates.

Why the pause?

The Bank of Canada is trying to balance two different problems.

Global Pressures: Rising oil prices and conflicts in the Middle East are pushing inflation up.
Domestic Slowdown: The Canadian housing market is stagnating, and job growth is slow.

Because inflation is still higher than they want (currently sitting at 2.4%), the Bank has signaled it is ready to raise rates if prices don't come down.

What the experts are saying

There is a divide among economists about what happens next:

The Hike Prediction: Major banks like BMO, TD, and Scotiabank believe the next move will likely be a rate hike. Scotiabank is forecasting an increase of 0.75% before the end of 2026.
The Cut Prediction: Some analysts argue that if the economy stays flat, the Bank might be forced to cut rates instead.

Despite the disagreement, the consensus is that borrowers should plan for tighter conditions, not easier ones.

Who is affected?

Variable-rate holders: If you have a variable-rate mortgage or a line of credit, your payments will stay the same for now. However, you are at risk if rates rise later this year.
Homebuyers: If you are planning to buy a home, a rate hike later this year would increase the cost of borrowing.
Savers: Higher rates later this year would be good news for high-interest savings accounts and GICs.

What you should do

Since a rate hike is a strong possibility for later in 2026, here are three steps to protect your finances:

Stress-test your budget: Do not just calculate your payments based on today's rate. Use a mortgage calculator to see if you can afford your payments if rates rise by 0.75% or 1.00%.
Pay down debt: If you have high-interest credit card debt or loans, focus on paying them off now before borrowing costs potentially rise.
Lock in if you are nervous: If you have a variable-rate mortgage and the thought of another hike keeps you up at night, talk to your lender about locking into a fixed rate. However, be aware that breaking a variable mortgage contract early can come with penalties.

Bottom line

The Bank of Canada is pressing "pause" this week, but the era of low rates is likely over. With inflation at 2.4% and major banks predicting hikes, you should use this stability to build a buffer in your budget for higher payments in the future.