What the Bank of Canada Rate Decision on March 18, 2026 Means

Home buyers hoping for a spring drop in interest rates will be disappointed: the Bank of Canada has chosen to keep its benchmark policy rate unchanged in its March decision, marking the third straight announcement without a change.

The Bank’s overnight rate remains at 2.25%, and the prime rate that lenders use to price loans remains at 4.45%. That prime rate serves as the baseline for many variable-rate products, including variable mortgages, HELOCs and various other borrowing products. These rates have stood at this level since October 2025, when the Bank completed a series of nine rate cuts.

Markets largely expected a hold. Canada’s labor market softened and overall economic activity remained weak through 2025, giving the Bank little near-term pressure to change course. The February Consumer Price Index from Statistics Canada, released on March 16, showed inflation at 1.8%, below the Bank’s 2% target—another reason policymakers opted for stability rather than action.

Still, the Bank highlighted new geopolitical risks that could alter that outlook. The war in Iran and elevated energy prices have the potential to push inflation higher. If energy-driven inflation gains momentum and proves persistent, the Bank could be compelled to raise rates again even if growth remains sluggish, a scenario consistent with stagflation risks.

For now the Bank says it is too soon to know how the conflict will affect Canada’s economy and whether policy needs to change in response. Policymakers want clear evidence that higher inflation is taking hold—and is likely to persist—before they consider further tightening.

“Against this overall backdrop, Governing Council decided to maintain the policy rate at 2.25%. With recent data pointing to weaker economic activity and uncertainty elevated, risks to growth look tilted to the downside. At the same time, inflation risks have gone up due to higher energy prices,” reads the Bank’s press release accompanying the announcement.

“We will continue to assess the impact of US tariffs and trade policy uncertainty, and how the Canadian economy is adjusting. We are also monitoring the unfolding conflict in the Middle East closely and assessing its impact on growth and inflation. As the outlook evolves, we stand ready to respond as needed.”

What the BoC’s rate hold means if you’re a mortgage borrower

Variable-rate mortgage holders are the most immediately affected by Bank of Canada decisions because variable products track a lender’s prime rate. With the Bank holding the policy rate, the effective interest rate, payment amount and the share of each payment applied to principal will remain unchanged for existing variable-rate mortgages.

If you’re shopping for a variable-rate mortgage, consider securing a pre-approval and rate hold sooner rather than later. While the prime rate won’t change until the Bank acts, lenders can adjust the margin they offer over prime, which could reduce the savings passed to borrowers. Many lenders will allow a rate hold for up to 120 days, locking in current variable-rate pricing—today’s low is about 3.35% for a five-year variable term.

Fixed mortgage rates are driven more by bond yields than by the policy rate. Since February, bond yields have climbed as investors price in the risk of prolonged conflict and rising inflation, and some lenders have increased fixed-rate offers in response. If you already have a fixed-rate mortgage, your rate is protected for the term. If you’re seeking a fixed rate or approaching renewal, securing pre-approval now can preserve options if fixed rates rise further.

What the BoC rate means to Canadians savings

A decision to hold rates can be interpreted differently depending on whether you are borrowing or saving. Borrowers hoping for immediate relief may be disappointed, while those valuing predictability will welcome the continued stability.

Savers and conservative investors generally benefit from higher benchmark rates because returns on guaranteed investments and deposit accounts tend to move with central bank policy. Products such as GICs and high-interest savings accounts typically adjust to reflect broader interest rate conditions. The current hold means the returns these products provide will remain stable for now, offering predictability for savers.

Read more about mortgages:

• Renewing your mortgage? A guide for Canadians
• The best 5-year fixed mortgage rates in Canada
• Helping your kids buy their first home: Smart strategies for today’s market
• Mortgage payment calculator