BMO Economics says a BoC rate hold through 2026 is the most likely path for Canadian mortgage brokers
With the Bank of Canada’s next rate decision due June 10, BMO Economics says a BoC rate hold through 2026 remains the most likely path.
That is the central message from a North American economic outlook published by BMO Economics on June 8, 2026. BMO’s Sal Guatieri says the Bank of Canada is on hold for the foreseeable future — with risks on both sides.
For mortgage brokers, that means a prolonged period of rate stability with limited relief in sight for clients on either side of the fixed versus variable decision.
Why the Bank is holding
The Bank of Canada kept its overnight rate at 2.25% — with the prime lending rate unchanged at 4.45% — at its April 2026 announcement. This marks its fourth consecutive hold since the cutting cycle ended in October 2025.
Bank of Canada Governor Tiff Macklem warned that if oil prices continue to rise and remain elevated, there may be a need for consecutive increases to the policy rate. BMO Economics does not expect it to come to that. Core inflation — excluding gasoline — is tracking close to the 2.0% target, and the weak economy limits how far any price pressures can spread.
In a separate interview with Canadian Mortgage Professional, Guatieri said that the Bank’s language indicated it was in no rush to cut or raise rates anytime soon. “Today it does look like the Bank of Canada is on hold for the foreseeable future,” he said. BMO Capital Markets expects the overnight rate to remain at 2.25% through 2026, with cuts unlikely before 2027 at the earliest.
Bank of Canada maintains policy rate at 2¼%https://t.co/bG6USpICxK#economy #cdnecon
— Bank of Canada (@bankofcanada) April 29, 2026
What a sluggish economy means for the rate outlook
The economy is the key reason the Bank is not moving. Canada tipped into a technical recession in Q1 2026. According to Statistics Canada’s May 2026 report:
- real gross domestic product was unchanged in Q1 2026 on a quarterly basis
- business capital investment fell 0.7%, its fifth consecutive quarterly decline
- resale housing activity dropped 9.9% during the quarter
BMO Economics cautions against reading this as a full-blown downturn. Some factors to consider:
- the contraction is far smaller in scale than any of the previous three recessions
- consumer spending rose 2.0% year-over-year
- a Statistics Canada flash estimate for April pointed to a 0.4% monthly rebound in output
The firm expects Canada to recover to 2.0% growth by 2027, assuming geopolitical tensions ease and oil prices stabilize.
What this means for brokers and their clients
For brokers, the question clients keep asking — should I lock in or stay variable? — has no clear answer yet. Variable rates are below their 2024 peak and BMO’s hold forecast keeps them stable near term.
An upside risk from an energy-driven rate hike has not disappeared entirely. Fixed rates are being pulled higher by bond market movements tied to the Iran conflict and trade review uncertainty under the Canada-United States-Mexico Agreement (CUSMA).
BoC rate hold 2026: keeping perspective
The outlook is not uniformly negative. The mortgage renewal wave — the anticipated surge of borrowers coming off low pandemic-era rates — is proving less damaging than feared. The Bank of Canada has indicated that renewing borrowers have weathered the transition better than projected, and that the wave is near its end.
The biggest remaining risk is trade policy. BMO Economics flags that a US exit from the North American free-trade deal would likely push Canada into a deeper contraction. This scenario would change the rate outlook entirely.
A new 10% forced-labour tariff levy is also possible, though CUSMA-compliant goods would retain duty-free treatment. For now, BMO’s base case points to gradual recovery and steady rates.
For mortgage professionals, the near-term operating environment is one of patience. That context is worth sharing with every client sitting on a renewal decision in 2026.
