Rate hold likely, but the real story is what happens to fixed and variable rates from here
The Bank of Canada is expected to hold its overnight rate at 2.25 percent on September 2, 2026. Mortgage brokers should prepare clients for more stability – the trade war and rising inflation are both in play.
That is the view of Jamie David, vice-president of mortgages at Ratehub.ca. David says the Bank of Canada is likely to hold. The central bank is weighing the trade war's impact on inflation and growth.
"The Bank is currently in a bind," David said, "with escalating trade tensions threatening to slow economic growth, while inflationary pressures weigh against any easing."
July's consumer price index (CPI) rose 3 percent year-over-year, up from 2.8 percent in June – matching the top of the Bank of Canada's 1–3 percent target range. Policymakers have little reason to consider a cut. That reading has significant implications for Canadian mortgage clients heading into the fall.
"With July CPI rising to 3.0 percent from 2.8 percent, policymakers have little reason to consider a cut," David said.
What the BoC rate decision means for fixed mortgage rates
Fixed mortgage rates could move in either direction over the coming weeks. The outcome depends on how the trade conflict unfolds.
A prolonged dispute could drive bond yields lower. That would pull fixed rates down as recession concerns build. Tariff-driven inflation pressure, by contrast, could push yields – and rates – higher.
That tension was visible in recent trading sessions. The five-year Government of Canada bond yield fell twice before edging back up. It reflects how sensitive markets have become to trade war news.
Some discounted fixed options remain available, according to Ratehub.ca. A two-year fixed mortgage rate is available at 3.89 percent. A three-year fixed sits at 3.94 percent. The lowest five-year fixed rate is 4.09 percent.
For clients approaching renewal, David recommends securing a rate hold now.
"A rate hold can protect you from potential rate increases for up to 120 days," he said, "providing security while the outlook for mortgage rates remains uncertain."
Brokers navigating the broader renewal wave facing Canadian mortgage holders will find the 120-day window particularly useful in the current climate.
Variable rates and the housing outlook
Variable mortgage rates are unlikely to move ahead of the Bank of Canada's September 2 rate decision. The best five-year variable mortgage rate currently sits at 3.35 percent, per Ratehub.ca.
The longer the trade dispute runs, the greater the possibility of future Bank of Canada rate cuts. That is especially true if tariffs begin to weigh on Canadian exports, business investment, employment, and overall economic growth.
"The Bank may need to lower rates to support the economy even with inflation running warm," David said.
The housing market faces similar uncertainty. David warned that trade disruption could prompt buyers and sellers to adopt a wait-and-see approach – a dynamic already weighing on Canada's housing market outlook.
"We saw a similar dynamic when tariffs were first introduced," he said. Canadian home sales fell 9.8 percent month-over-month in February 2025. That was the largest monthly decline since May 2022, as buyers pulled back from the market.
For mortgage brokers, the September 2 Bank of Canada rate decision is unlikely to produce a surprise. The bigger question is what follows – and how long the trade war continues to shape the answer.
