Canada’s inflation story just took another turn, and if you’re watching mortgage rates closely in Alberta, this update matters.
According to Dr. Sherry Cooper, Chief Economist at Dominion Lending Centres, Canada’s Consumer Price Index (CPI) rose to 2.4% year-over-year in December, up from 2.2% in the previous two months. While that jump might sound small, it has real implications for interest rates, mortgage approvals, and buyer confidence heading into 2026.
As a Lethbridge mortgage broker helping families across Southern Alberta, I want to break this down in plain language and explain what it could mean for you if you’re buying, renewing, or refinancing this year.
CPI Inflation Rose to 2.4%: Why Did It Increase?
Inflation rising from 2.2% to 2.4% doesn’t necessarily mean everyday costs suddenly surged across the board. Dr. Cooper explains that the main driver was a temporary GST/HST break that began on December 14, 2024.
That tax exemption caused certain goods and services to drop temporarily in price. Now that those price declines are no longer part of the year-over-year comparison, it created upward pressure on headline inflation.
In other words, inflation “rose” partly because of how the data is being compared, not because every category suddenly got much more expensive overnight.
Gas Prices Helped, But Inflation Still Pressured Higher
Gasoline helped soften the headline number.
Even though overall CPI accelerated, the year-over-year decline in gasoline prices helped moderate the increase. That said, when you remove gas from the equation, inflation looks hotter:
- CPI excluding gasoline increased 3.0% year-over-year, up from 2.6% in November
That “excluding gasoline” number is important because it can reveal underlying inflation trends beyond one volatile category.
Monthly CPI Dropped, But Seasonally Adjusted CPI Rose
There were mixed signals in the month-to-month data:
- CPI fell 0.2% month-over-month
- But seasonally adjusted CPI increased 0.3%
This is one of those situations where the inflation picture isn’t “all good” or “all bad” it’s mixed, and that’s exactly why the Bank of Canada has been cautious.
Restaurants and Food Were Big Inflation Drivers
One of the biggest inflation surprises was the sharp rise in restaurant costs. Year-over-year, the largest contributor to faster CPI growth was food purchased from restaurants.
Key increases Dr. Cooper highlighted:
- Restaurant food prices: +8.5% (up from +3.3% in November)
- Alcoholic beverages in licensed establishments: +6.5%
- Alcohol purchased from stores: +5.6%
Other categories impacted by the GST/HST exemption also swung upward:
- Toys, games, hobby supplies: +7.5%
- Children’s clothing: +4.8%
- Snack products (chips etc.): +7.9%
- Confectionery: +14.2%
And grocery-store inflation is still hanging around:
- Food purchased from stores: +5.0% year-over-year
Two big contributors were:
- Coffee: +30.8%
- Fresh/frozen beef: +16.8%
So while inflation overall is not out of control, it’s clear that food costs remain stubborn, which matters because food is one of the categories Canadians feel the most.
Core Inflation Cooled: A Big Signal for Interest Rates
This is the part mortgage shoppers should pay attention to.
Dr. Cooper notes that Canada’s core inflation measures decelerated sharply in December, with the Bank of Canada’s two core measures easing to their lowest level in a year.
Core inflation is what the Bank of Canada watches closely because it strips out more volatile price changes and helps reveal the “true” inflation trend.
When core inflation eases, it gives the Bank of Canada more room to hold rates steady, and that’s good news for mortgage stability.
Bottom Line: Bank of Canada Likely on Hold
Dr. Cooper’s view is clear:
This inflation report supports the Bank of Canada staying on hold for most of 2026.
She also notes that outside of food, inflation seems to be dissipating, and Canada’s economy has been in better shape than expected due to upward revisions to GDP since 2022, supported by stronger productivity growth.
Could rates go up again?
Yes, but likely not soon.
Dr. Cooper suggests the next rate move is more likely to be a hike, but not until 2027, unless major trade disruptions occur (such as the US withdrawing from CUSMA).
For mortgage buyers and homeowners, that points to a period of relative stability.
What This Means for Alberta Mortgage Rates
If you’re buying a home in Alberta, this is the environment we’re working in:
- Inflation is not gone, especially in food-related categories
- Core inflation is cooling
- The Bank of Canada is likely holding rates through much of 2026
- Borrowers may see more stable lending conditions
In practical terms, Alberta mortgage shoppers may benefit from:
- more predictable rate planning
- improved confidence in qualifying
- less volatility in variable rate expectations (in the short term)
If you’re in Lethbridge, this matters even more because local affordability and qualification limits are often the difference between “we can buy now” and “we need to wait.”
Housing Market: The Biggest Loser of the Past Year
One of Dr. Cooper’s biggest takeaways is that despite better economic growth and easing inflation pressures, housing has struggled, especially in Ontario, where tariff uncertainty has weakened activity the most (based on CREA data).
While Alberta has remained more resilient in many areas, uncertainty still impacts:
- buyer confidence
- listing activity
- pricing momentum
- renewal decisions
Dr. Cooper notes that reduced uncertainty around the Canada–Mexico–US trade agreement will be key for a rebound in housing activity, particularly in Ontario and Quebec.
What You Should Do If You’re Buying or Renewing in 2026
If you’re thinking about a purchase, refinance, or renewal in Alberta this year, the best move is to plan strategically instead of guessing.
A few smart steps:
- Get a pre-approval before you shop seriously
- Review your renewal options early (don’t wait until the last minute)
- Run the numbers on fixed vs variable in your specific situation
- Make sure debts (like vehicle payments) aren’t limiting your approval power
A good Alberta mortgage broker will help you build a plan based on today’s rates, your income, your goals, and what the market is doing now.
Need a Mortgage Plan in Lethbridge or Anywhere in Alberta?
If you want a no-pressure quote, purchase plan, or renewal review, reach out anytime.
Dillan Kelly
Alberta Mortgage Broker | Dominion Lending Centres Mortgage Excellence
📞 403-894-5818
🌐 dkmortgageteam.ca
Source
Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drsherrycooper@dominionlending.ca
