Bank of Canada Interest Rate — 2026 Tracker & Forecast

The overnight rate is the interest the Bank of Canada targets for one-day lending between major financial institutions. It is not your mortgage rate — it is two steps removed from it, and confusing the three numbers is the single most common mistake Canadian borrowers make.

Prime sits a fixed spread above the overnight rate. When BoC moves 25 basis points, prime moves 25 basis points within a day or two, and every variable mortgage and HELOC in the country reprices.

What happens to your payment depends on which kind of variable you hold — and most borrowers do not know which one is in their contract.

• Adjustable-rate mortgage (ARM): your payment changes with prime. A cut lowers your payment immediately; a hike raises it.
• Variable-rate mortgage with fixed payment (VRM): your payment stays the same and the split between principal and interest changes. A cut sends more of the same payment to principal; a hike sends less, and if rates rise far enough you hit your trigger rate and the lender forces a payment increase or lump sum.
• Fixed-rate mortgage: nothing changes until renewal. Your rate was locked when you signed.

Rough impact of a single 25 bps cut on a 25-year amortization:

Model your own balance in the mortgage calculator.

The Bank of Canada announces eight fixed rate decisions a year, roughly every six weeks, at 9:45 a.m. Eastern. Four of those come with a full Monetary Policy Report and a press conference, and those are the meetings where the language shifts most.

What actually moves markets on announcement day is rarely the decision itself — it is usually already priced. Watch instead for:

1. The forward guidance sentence at the end of the statement, which signals the direction of the next move.
2. Core inflation measures (CPI-trim and CPI-median), which the Bank weighs more heavily than headline CPI.
3. The labour market read — unemployment and wage growth drive the Bank's view of demand pressure.
4. BAX futures pricing, which shows the probability the market assigns to each future move. It is a far better forecaster than any single quote from a Governor's speech.

This surprises people every cycle. Fixed mortgage rates follow the 5-year Government of Canada bond yield, and bond yields price in expected future policy, not today's decision. By the time the Bank cuts, the bond market has usually already moved.

So there are three possible outcomes on any announcement day:

• Cut smaller than expected — yields rise, fixed rates can tick up even though the Bank cut.
• Cut as expected — fixed rates barely move, because it was priced weeks ago.
• Cut with dovish guidance — yields fall further and fixed rates follow with a lag of days to weeks.

Practical consequence: if you want a lower fixed rate, watch the 5-year GoC yield, not the BoC calendar. If you want a lower variable rate, watch the BoC calendar.

• If you are shopping now: take a rate hold. It is free, lasts 90–120 days, protects you from a rise, and most lenders will still float you down if rates fall before closing.
• If you are in a variable and rates are falling: keep your payment where it is instead of taking the reduction. The same payment at a lower rate shortens your amortization measurably — see the prepayment calculator.
• If you are in a variable and rates are rising: check your trigger rate before your lender does, and consider increasing your payment voluntarily rather than getting a forced adjustment.
• If you renew within 6 months: start shopping now. Most lenders will hold a rate through your renewal date, so you cannot lose by locking early.
• If you are deciding fixed vs variable: price the exit, not just the rate. Variable breaks at three months' interest; fixed breaks at the greater of three months' interest or IRD.