The Bank of Canada (BoC) is set to make another interest rate announcement this month.
Canada’s central bank held the key interest rate at 2.25 per cent in January, a rate that it has maintained since October 2025.
At the time, the Bank of Canada governing council said the interest rate remained “appropriate” based on economic conditions.
However, a lot has happened since January, with the institution having to take economic uncertainty amid geopolitical conflicts into consideration. So, how might this affect the policy rate update this month, and how could it impact everyday Canadians?
Ratehub.ca mortgage expert Penelope Graham shares her predictions ahead of the next Bank of Canada interest rate announcement on Wednesday, March 18.
Will the Bank of Canada change the interest rate?
Gary A Corcoran Arts/Shutterstock
Graham says the onset of the war between the United States and Iran has shifted the economic implications for Canada, which will factor into the BoC’s monetary policy decision.
“Rising oil prices, if sustained, could quickly re-heat inflation growth and compel the Bank to hold off on future rate cuts, even as Canadians struggle to cope with high living costs and ongoing trade uncertainty,” she explains.
Because the situation is evolving quickly, Graham predicts the Bank of Canada will most likely continue to hold the interest rate in its March update “with little to no rate relief on the horizon for the remainder of this year.”
How could mortgage rates and housing be affected?
Yuganov Konstantin/Shutterstock
Graham says variable mortgage rates continue to be the lowest-priced borrowing option, with a five-year variable term as low as 3.35 per cent. This will remain the case as long as the central bank holds its policy rate.
“Going variable can offer borrowers great value, as long as they have the risk tolerance and room in their budget to absorb future increases, or a plan to lock into a fixed-rate option should the Bank revert to a hiking cycle,” suggests Graham.
As for fixed rates, the mortgage expert says they’re still competitively priced, with the lowest five-year term at 3.69 per cent.
“However, this pricing isn’t likely to last, as upward pressure steadily builds under bond yields,” she explains. “The same geopolitical uncertainty and inflation pressures have raised doubts that the US Federal Reserve will cut American interest rates; this has pushed up the 10-year Treasury yield – considered the global benchmark – back above the 4.1 per cent range.”
According to Graham, this has impacted Canadian bond yields. The federal government five-year bond yield, which is largely used by lenders when pricing their fixed mortgage rates, broached the three per cent mark this week.
She says lenders have already begun increasing their fixed rates, and that more hikes are likely in the short term. Due to this, Canada’s housing market may be slow this spring.
“Given rates probably won’t drop further, and labour and trade pressures remain, home buyers are unlikely to return to the housing market in droves this spring season,” states Graham. “However, motivated buyers will take advantage of comparably good borrowing costs, ample supply, and softer home prices.”
Here’s how you can stay up-to-date with the Bank of Canada interest rate updates in 2026.