Mortgage & Wealth Strategies

Bank of Canada Hits Pause — But Uncertainty Is Doing the Talking

February 2, 2026 | Posted by: Matt Broom-Hall

The Bank of Canada held its overnight rate steady last week, which came as no surprise to the market.

What was more interesting was the tone of its messaging.

The Bank repeated that rates are “about right” based on its current outlook, and that economic data around growth and inflation hasn’t changed much since its December meeting. In other words: no urgency to move — for now.

But reading between the lines, uncertainty was clearly front and centre.

A lot of the Bank’s commentary focused on growing global risks, particularly trade uncertainty tied to the U.S. This includes unpredictable tariff threats, the upcoming renegotiation of CUSMA later this year, and even concerns around political pressure on the U.S. Federal Reserve and how that could spill over into global markets.

To put a number on it: the word uncertainty appeared more than 20 times in the Bank’s Monetary Policy Report, and Governor Macklem leaned heavily on the same theme during his press conference.

The message was clear — the global backdrop is getting murkier, and that limits how confident central banks can be about the path forward.

The Bank also acknowledged something important: it has limited tools to directly help the specific sectors being hit hardest by these risks. That reality helps explain why it’s choosing patience over pre-emptive rate cuts right now.

That said, the Bank made a point of saying it’s prepared to move quickly if the outlook changes.

Given the emphasis on downside risks, if the next move does come, I still think it’s far more likely to be a cut than a hike.

What’s Happening in the U.S.
South of the border, the U.S. Federal Reserve also held rates steady.

Unlike Canada, the Fed slightly upgraded its view of the U.S. economy and gave little indication that cuts are imminent — despite ongoing political pressure to lower rates.

As one economist neatly summed it up: the Fed may be under political pressure, but it isn’t under economic pressure yet.


What This Means for Mortgage Rates
Despite all the noise — tariffs, market swings, and political headlines — global bond yields were fairly stable last week.

As a result:
• Canadian fixed mortgage rates stayed range-bound
• Variable-rate discounts were unchanged

Bond markets are now pricing in a longer pause from the Bank of Canada in 2026, and interestingly, many investors are betting the next move could be a hike.

I’m not in that camp.

I still expect at least one more 0.25% cut at some point this year, especially given how clearly the Bank emphasized its willingness to react if conditions deteriorate.

Insider Strategy
There is a way to make mortgage interest tax-deductible in Canada — but it’s not a quick win.

It requires patience, discipline, and in some cases significant investment capital. When done properly, though, it can create meaningful long-term savings.

It’s not for everyone, but it is worth understanding if you’re focused on wealth-building rather than just rate-shopping.

To learn how this all works, check out part one and part two.

My Take Right Now
My advice hasn’t changed.

Fixed rates are sitting close to long-term averages, and three- and five-year fixed terms remain the most popular options.

The cost to “buy extra years” on a fixed rate has been creeping up, and I expect that trend to continue. Right now, five-year fixed terms still offer slightly better value.

Variable rates, in my view, still have the potential to deliver the lowest overall borrowing cost over a full term — even if near-term rate cuts aren’t guaranteed.

That said, variable rates are not a set-and-forget choice.

If you’re considering one, you need:
• Comfort with short-term volatility
• The financial capacity to handle higher payments if rates move the wrong way

Strategy matters more than headlines — and more than the rate alone.

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