Today, January 28, 2026, the Bank of Canada (BoC) announced it is holding its target for the overnight rate at 2.25%. This second consecutive hold signals a “wait-and-see” approach as the Canadian economy navigates a complex global trade landscape and shifting domestic conditions.
For those looking for the best mortgage rates in Ontario, this announcement provides a rare moment of stability in a market that has seen significant volatility. If you are a first-time home buyer in Ontario, here is how today’s decision, and the latest market data, will affect your journey this year.
Why the Hold? Trade Uncertainty and Inflation
The BoC’s decision to maintain the 2.25% rate is largely driven by “heightened uncertainty” regarding U.S. trade policies and the upcoming review of the Canada-U.S.-Mexico Agreement (CUSMA).
- Inflation: National CPI inflation edged up to 2.4% in December 2025, though core measures (excluding taxes) continue to slow.
- Growth: The Bank projects modest GDP growth of 1.1% for 2026, as the economy adjusts to trade pressures.
- Labour Market: While employment has risen recently, the Toronto unemployment rate remains elevated at 8.7% (as of October 2025), suggesting continued slack in the market.
Market Context: A “Buyer-Favouring” Reset
According to the TRREB December 2025 Market Watch, the Greater Toronto Area (GTA) has entered 2026 as a more affordable environment.
- Average Price: The average GTA selling price in December 2025 was $1,006,735, a 5.1% drop from the previous year.
- Inventory: With 17,005 active listings (up 17.5% year-over-year), buyers have the highest level of choice seen in years.
- Negotiating Power: The sales-to-new-listings ratio remains in territory that allows buyers to negotiate more effectively on price and conditions.
Impact on Your Mortgage Strategy
With the policy rate held, lowest mortgage rates in Canada are expected to stabilize rather than drop further in the immediate term.
- Fixed vs. Variable: Fixed rates (currently around 3.89% for 5 years from top providers) have already priced in the BoC’s neutral stance. If you expect further economic softening, a variable rate (near 3.55%) might be attractive, but economists suggest rates may stay on pause for most of 2026.
- Consult a Mortgage Broker Toronto: In a stable-rate environment, brokers can help you access private mortgage lenders in Toronto who may offer more flexible terms for those with non-traditional income sources.
- Refinance mortgage Canada: If you bought at the market peak in 2024, today’s rate hold is a signal to keep an eye on your renewal date. With rates significantly lower than their 2024 highs (when 5-year rates were over 6%), 2026 may be the year to refinance your mortgage in Canada.
Maximizing Your Incentives in 2026
The combination of lower prices and stable rates makes this a prime time to stack first-time home buyer Ontario incentives:
- The FHSA & HBP: Use your First-Home Savings Account (up to $8,000/year) and the Home Buyers’ Plan (up to $60,000 from your RRSP) to build a substantial down payment.
- Land Transfer Tax Refunds: Don’t forget the combined $8,475 in rebates available to eligible first-time buyers in the City of Toronto.
- Equity Growth: With inventory elevated, consider real estate investment in Toronto through a “starter” condo (average price $628,029 as of late 2025) to build equity while the market transitions toward recovery.
Protect Your Investment
As you enter the market, remember that financial stability requires more than just a low rate.
- Legal Protection: Given the high unemployment rate and changing insurance rules in Ontario, ensure your income is protected. If an injury affects your ability to work, consulting a personal injury lawyer in Ontario is vital to ensuring your mortgage stays paid.
- Cash Flow: Avoid over-leveraging. Use tools like a personal loan in Canada only for essential improvements that add immediate value to your property.
The Bottom Line: Today’s rate hold is a green light for prepared buyers. While “uncertainty” is the Bank’s keyword, “opportunity” is yours.
For more deep-dives into the local market trends, browse barhoot.com.
