Bank of Canada Rate Hold: As Good As It Gets for Home Buyers

After weeks of whiplash-inducing decisions from world leaders involved in the Iran war, someone unfamiliar with the Bank of Canada might have expected it to get sucked into the vortex and make a hasty move of its own.

But the sweetly predictable BoC has so far looked through the conflict and its short-term impact on inflation, announcing on April 29, 2026, that it would maintain its overnight lending rate of 2.25% — its fourth consecutive hold.

With inflation hovering near the Bank’s 2% target — and even dipping from February to March if eye-watering gasoline prices are stripped out — an April rate hold was easy enough to predict. Even with the uncertainty created by the war, many economists still expect the Bank to leave the overnight rate at its current level for much, if not all, of 2026.

With life as expensive as it is, any policy move that maintains the status quo can feel damaging. But there are reasons to think an unchanged overnight rate might help the Canadian housing market.

In an economy best described as “queasy,” a steady overnight rate can provide a little peace of mind. It signals that the economy isn’t weak enough to require a stimulative rate cut. This is some seriously subtle macroeconomic messaging, but maybe it’s enough to coax some buyers off the sidelines.

More importantly, buyers might realize that today’s mortgage market is about as good as it’s going to get.

Is it time for another variable-rate bonanza?

Before the war in Iran, the question facing most buyers was simple: fixed or variable?

At the time, the country’s lowest fixed mortgage rates were below 4%, and the best variable rates undercut them by roughly 0.4 percentage points. After the war sent bond yields soaring, fixed rates below 4% all but disappeared. As April winds down, most fixed rates at big banks are closer to 5% than 4%.

Variable rate offers, on the other hand, are still available at brokerages and online lenders for around 3.4%, so the choice for many buyers today is “variable or nothing?”

Opting for a variable rate rather than a fixed one effectively increases a buyer’s purchasing power. (A mortgage at 3.4% buys you more house than one at 4.4%.) If thousands of home buyers make that choice at the same time, the market suddenly becomes more competitive.

Once buyers are made aware of this shift — their real estate agents just might tip them off — their mentality could switch from wait-and-see to FOMO.

If Canadians are convinced that mortgage rates as low as 3.4% won’t be available eight months from now, some of them will get moving. They don’t want to be on the wrong side of that window when it closes.

Obstacles remain

What’s laid out above is fairly idealistic. Year-to-date, home sales in Canada are down 7.9% versus the first quarter of 2025 — a difference of almost 7,900 transactions — so there are legitimate reasons to question whether a rebound is even possible.

First, plenty of homeowners have been burned by choosing a variable rate right before a period of increased inflation.

This was largely a pandemic-era phenomenon, but if the war in Iran — or some other unforeseen global misstep — triggers high inflation, homeowners with variable rates could once again see their mortgage costs spike if the Bank of Canada resumes hiking its overnight rate.

Second, affording a home is not just about home prices. It’s about gas, food prices, and everything else people need to pay for too.

There’s no way of knowing how much the war will ultimately cost Canadian consumers. The longer oil prices stay elevated, the more expensive our daily lives become. It’s hard to commit to a home purchase when you don’t know how drastically your non-mortgage costs might change from one month to the next.

There’s also another two and a half years of Donald Trump to worry about. The upcoming Canada-United States-Mexico Agreement negotiations could be drawn-out and ugly, and the fallout is anyone’s guess.

That’s likely too much uncertainty for most home buyers. Recent polling from TD found that only 30% of prospective buyers intend to get into the market before the end of the year.

Those who can shrug off the risk have attractive variable rates and slightly lower home prices working in their favour. Under normal circumstances, those factors would fuel a rocking spring market.

But soft prices are a function of weak demand. Many buyers are being held back from the market by forces beyond their control. Whether it’s something tangible, like high food and gas costs, or something psychological, like economic anxiety, the reaction is the same: Let’s wait until things get better.

Because if this is as good as buying conditions get, they’re still not good enough for most Canadians.