Bank of Canada Expected to Hold Rates Again as Fixed Mortgage Costs Stay Elevated

The Bank of Canada is widely expected to leave its policy rate unchanged at 2.25% when it announces its next decision on 15 July, extending a hold that has been in place since October 2025. Most bank prime rates have remained at 4.45% before lender discounts. The central bank is caught between competing pressures: the conflict in the Middle East has driven oil prices higher and raised inflation risks, while the economy contracted in the first quarter before recovering with 0.5% real GDP growth in April, the best reading in nine months. For borrowers, the picture is mixed. The lowest variable mortgage rates available through brokers and online lenders sit at around 3.3%, while the lowest fixed rates are near 3.9%, with fixed pricing under pressure because lenders base it on government bond yields, which climbed after the oil price spike raised inflation expectations. The Canadian five-year bond yield has been holding around 3.1% following a solid June labour report. The path for fixed rates depends heavily on the war: a de-escalation would likely pull yields and mortgage rates lower, while further escalation could push them higher.