If you’ve been watching interest rates closely, the latest update from the Bank of Canada offers some important clarity.
The Bank of Canada has once again held its policy rate steady at 2.25%, signaling that officials believe interest rates are currently in a neutral position — neither stimulating nor slowing the economy excessively. With inflation hovering just above the Bank’s 2% target, this decision reflects growing confidence that inflation is under control, even as economic uncertainty remains.
Below is a breakdown of what this decision means, especially for home buyers, homeowners, and mortgage renewals in Lethbridge and across Alberta.
Why the Bank of Canada Held Rates Steady
According to the Bank, inflation came in at 2.1% in 2025, with core inflation easing to 2.5%. The Governing Council stated that the current overnight rate remains appropriate, provided the economy continues to evolve in line with its projections.
Key economic themes include:
- Slowing population growth, which reduces pressure on housing and consumer demand
- Modest economic growth expected in the near term
- Trade-related cost pressures being offset by excess supply in the economy
The Bank now projects Canadian GDP growth of:
- 1.1% in 2026
- 1.5% in 2027
These projections remain largely unchanged from earlier forecasts.
Trade Uncertainty and the CUSMA Risk
One of the largest risks highlighted in the Bank’s Monetary Policy Report is the upcoming CUSMA (Canada–US–Mexico Agreement) review.
Canada currently benefits from an effective U.S. tariff rate of 5.8% due to exemptions under the trade agreement. An unfavourable outcome could:
- Reduce Canadian exports
- Slow business investment
- Weigh on employment and GDP growth
While Canada is actively diversifying trade relationships — including increased oil exports to China — there is currently no market that can replace the size, proximity, and efficiency of U.S. trade.
What’s Happening in the United States
South of the border, the U.S. economy is showing mixed signals.
- Consumer spending remains strong
- AI-related investment is surging
- Consumer confidence dropped sharply in January to its lowest level in 12 years
The U.S. Federal Reserve has also held rates steady but is expected to cut rates up to three times in the second half of the year, potentially bringing its policy rate down to the 3.5%–3.75% range.
These U.S. trends matter because they directly influence Canadian bond yields — and ultimately, mortgage rates.
Why Fixed Mortgage Rates Have Recently Increased
Even though the Bank of Canada held its policy rate, market-driven interest rates have moved higher.
- The 5-year Government of Canada bond yield is once again testing the 3% level
- The 2-year bond yield sits around 2.67%, above the overnight rate
- The Canadian dollar has strengthened
As a result, lenders have recently increased fixed mortgage rates. If bond yields remain elevated, fixed rates may stay higher or even rise further — making them more attractive for borrowers who expect rates to increase again down the road.
What This Means for Alberta Mortgage Borrowers
For homeowners and buyers in Lethbridge and Southern Alberta, here’s how this impacts your mortgage decisions:
- Variable-rate holders may benefit from continued stability in the short term
- Fixed rates may become more popular if bond yields stay elevated
- Upcoming renewals should be reviewed early to assess fixed vs variable options
- Buyers should focus on affordability and qualification strategies rather than timing the market
With ongoing trade uncertainty and shifting global conditions, having a proactive mortgage strategy matters more than ever.
Final Thoughts
The Bank of Canada has made it clear that it is prepared to support the Canadian economy amid trade uncertainty, but risks remain — particularly surrounding U.S. tariffs and the CUSMA review.
For mortgage borrowers, the key takeaway is this: rate stability does not guarantee lower mortgage rates, especially for fixed terms driven by bond markets.
If you’re buying, renewing, or refinancing, now is the time to review your options and make sure your mortgage strategy aligns with where the economy is heading — not just where it’s been.
Credit & Attribution
Economic insights and analysis summarized from commentary by Dr. Sherry Cooper, Chief Economist, Dominion Lending Centres.
Need Personalized Mortgage Advice in Alberta?
If you’re looking for guidance tailored to Lethbridge, Southern Alberta, or anywhere in Alberta, I’m happy to help.
Dillan Kelly
Mortgage Broker
Dominion Lending Centres Mortgage Excellence
🌐 Website: https://dkmortgageteam.ca
📞 Phone: 403-894-5818
Whether you’re renewing, purchasing, or just want to understand how today’s rate environment affects you, feel free to reach out.
