The Bank of Canada Holds Steady — And So Does Everyone Else

Well, here we are again. On January 28, 2026, the Bank of Canada looked at the economic landscape, stroked its metaphorical chin, and decided to do… absolutely nothing. For the second consecutive meeting, the key overnight rate was left right where it was — parked at 2.25%, thank you very much, no further moves at this time.

To be fair, “doing nothing” is very much a deliberate something in central banking. This hold follows a series of four rate cuts through 2025 that brought the rate down from a lofty peak of 5.0% — a descent that felt, to many exhausted mortgage holders, like watching a glacier slowly inch its way downhill. The Bank has now essentially said: we’ve cut, we’ve paused, and we’re watching. The phrase they’d prefer you use is “wait-and-see.” The phrase most GTA homebuyers are using is something rather less printable.

The Good News: Boring Is Beautiful

For variable-rate mortgage holders and those with Home Equity Lines of Credit, the January hold means no nasty surprises in the monthly payment column — at least for now. Variable mortgage holders and lines of credit won’t see significant changes, and many prospective homeowners are gravitating toward fixed-rate mortgages to sidestep uncertainty altogether. Predictability, it turns out, is a love language in the real estate world. 

The Bank’s hold is being interpreted as a signal of cautious but renewed optimism — a sentiment shift, if you will, from outright anxiety to something more like nervous optimism, with buyers and investors beginning to re-engage while sellers still face a discerning, price-sensitive crowd. In other words: the ice is thawing, but nobody’s diving in just yet.

The Economy: Functioning, With Asterisks

The Bank expects consumer spending and business investment to strengthen gradually through the year, with the economy projected to grow 1.1% in 2026 and 1.5% in 2027 — figures largely consistent with their earlier October forecasts. Modest? Sure. But after the rollercoaster of recent years, “modest and stable” sounds practically luxurious.

On the inflation front, the December Consumer Price Index showed inflation ticking up to 2.4% from 2.2% in November, though the Bank’s preferred core measures actually declined — which is precisely why they didn’t feel the need to act. The beast, for now, is reasonably well-behaved.

The elephant in the room — or perhaps more accurately, the orange-haired elephant south of the border — is the looming Canada-U.S.-Mexico Agreement review. The Bank flagged this as a “key source of uncertainty,” noting that a failure to renegotiate could plunge a wide swath of Canadian industries back into tariff turbulence. So yes, we’re watching Washington again. As one does, apparently, forever.

The GTA Market: A Study in Waiting

Meanwhile, the Greater Toronto Area real estate market continues its peculiar dance of “lots of listings, not a lot of buyers.” The average residential sale price in the GTA fell 4.2% year-over-year in 2025 to just under $1.075 million, while the number of sales transactions dropped 10.7% and total listings surged by 17.2%. That’s a buyer’s market on paper — and yet many would-be buyers are still glued to the bench.

Why? Canada’s buying slump is mainly attributed to a lack of confidence and fear amid highly volatile economic conditions, with job security concerns a top factor — especially in markets exposed to U.S. steel and manufacturing tariffs. Knowing your mortgage payment won’t change next month is one thing; knowing you’ll still have a paycheque to cover it is quite another.

TRREB’s 2026 Market Outlook projects the GTA average home price to land somewhere between $1 million and $1.03 million, with elevated inventory expected to keep giving buyers meaningful negotiating leverage — particularly in the condo market. And in a rather telling data point, an Ipsos survey found that GTA homebuying intentions for 2026 actually declined by five percentage points compared to 2025 — to just 22% — despite improved affordability. Cheaper to buy than it was? Yes. Confident enough to buy? Not quite. That about sums up Toronto in 2026.

The silver lining — and there is one, if you squint — is that first-time buyers are expected to be a key driver of any recovery, with Ipsos data showing that 45% of those intending to buy in 2026 will be entering the market for the first time. The next generation is gearing up. They just need the stars to align a little more first.

What Comes Next?

Most forecasters now expect the Bank of Canada to hold the policy rate at 2.25% throughout much of 2026, meaning variable mortgage rates are likely to stay put while fixed rates could inch slightly higher in line with bond yields. A minority of analysts still hold out for modest hikes later in the year if inflation proves stickier than hoped, but the consensus mood is one of steady-as-she-goes.

For GTA buyers, sellers, and investors, the message is clear: this is a “stable but affordability-tight” environment — not a new wave of rate relief, but not a renewed tightening either. Waiting for cuts that may not materialize could mean missing out on negotiable prices and decent inventory available right now. But then again, timing the Toronto market has humbled far wiser souls than us.

So the Bank of Canada holds. The market holds its breath. And somewhere in the GTA, another would-be buyer refreshes Property.ca for the fourteenth time this week and decides to “wait just a little longer.” Same as it ever was.