Bank of Canada Announcement- What does this mean for your Variable Rate vs Fixed Rate

Bank of Canada Holds Prime Rate at 2.25% - What This Means for Your Mortgage

By Matt - The Welcome Matt | January 28, 2026

Today, the Bank of Canada announced they're holding the prime rate steady at 2.25%. If you're shopping for a mortgage in the Fraser Valley or already have one, you might be wondering: "Does this affect me?" The answer depends entirely on which type of mortgage you have—and understanding the difference could save you thousands of dollars.

Let me break this down in the simplest way possible.

The Restaurant Menu Analogy

Think of mortgage rates like ordering at a restaurant:

A fixed-rate mortgage is like ordering the prix fixe menu. You pay $50 for your three-course meal, and that price is locked in from the moment you order until you finish dessert. Even if the restaurant raises all their prices tomorrow, you still pay $50. You know exactly what you're getting, and the bill won't surprise you.

A variable-rate mortgage is like ordering à la carte with "market price" items. Today the salmon costs $30, but next month it might be $25 or $35 depending on what the supplier charges the restaurant. You're taking a chance that prices might go down, but you're also accepting they could go up.

What Happened Today and Why It Matters

The Bank of Canada's prime rate is like the wholesale price that lenders pay. When they held it at 2.25% today, they're essentially saying "we're keeping the base cost the same."

If You Have a Variable Rate Mortgage:

Good news—your rate stays the same... for now.

When the Bank of Canada holds the rate steady (like today), your rate doesn't change. But here's the key thing to understand: variable rates move with every Bank of Canada announcement. They meet 8 times per year, which means your rate could potentially change 8 times.

The Variable Rate Reality Check:

Think of a variable rate like driving with cruise control that someone else controls. Right now, you're cruising along at a comfortable speed. The Bank of Canada is the driver, and every 6-8 weeks they decide whether to speed up (raise rates), slow down (lower rates), or maintain speed (hold steady like today).

Current Variable Rate Advantage: As of today, variable rates in the Fraser Valley are typically 1.5% to 2.0% lower than comparable fixed rates. On a $500,000 mortgage, that's roughly $4,000-$6,000 per year in interest savings. But remember—this advantage only lasts as long as rates stay low.

If You Have a Fixed Rate Mortgage:

Today's announcement has zero impact on you.

This is the whole point of a fixed rate. You locked in your rate when you signed your mortgage, and it won't change until your term is up (typically 5 years). The Bank of Canada could raise rates six times or drop them to zero, and your payment would stay exactly the same.

The Fixed Rate Reality Check:

Think of a fixed rate like buying insurance. You're paying a premium (a higher rate) for certainty. On that same $500,000 mortgage, you might be paying $4,000-$6,000 more per year compared to today's variable rates, but you're sleeping soundly knowing your payment will never increase.

The Real Question: Which Should You Choose?

This isn't about which is "better"—it's about which matches your situation and personality.

Choose Variable If:

You're financially flexible. If rates rise by 1% over the next year, could you handle an extra $400/month on a $500,000 mortgage? If that would strain your budget, variable might not be for you.

You can tolerate uncertainty. Some people check their mortgage rate after every Bank of Canada announcement and feel anxious. Others don't think about it. Be honest about which camp you're in.

You believe rates will stay low or drop. With prime at 2.25% and inflation moderating, many economists believe we're near the bottom of this rate cycle. But nobody has a crystal ball.

You're okay with potential regret. If you lock in at 3.5% fixed and rates drop to 1%, you'll be kicking yourself for five years. Can you live with that?

Choose Fixed If:

Your budget is tight. If you're stretching to afford your Fraser Valley home (and let's be honest, who isn't these days?), the peace of mind of knowing your exact payment for 5 years is invaluable.

You're risk-averse. No shame in this. Some people skydive; others prefer the ground. If the thought of your mortgage payment changing keeps you up at night, pay the premium for fixed.

You're buying at the top of your budget. If you qualified based on current rates and any increase would stress your finances, fixed is the responsible choice.

You value simplicity. With a fixed rate, you sign the papers and forget about it for five years. No tracking the Bank of Canada, no surprises, no decisions to make.

The Fraser Valley Context

Here in the Fraser Valley, I'm seeing a lot of buyers lean toward variable right now, and it makes sense given the rate environment. But here's what many first-time buyers don't realize:

The 2% "Breaking Point"

Currently, there's about a 1.5-2% gap between variable and fixed rates. This means if the Bank of Canada raises rates by 1.5-2% during your term, you'll end up paying the same as if you'd chosen fixed. Anything beyond that, and you're worse off than if you'd locked in.

Historical Context: In 2022-2023, we saw the Bank of Canada raise rates by 4.75% in just 18 months. People with variable rates saw their payments skyrocket. That's an extreme example, but it's why this decision matters.

What Today's Hold Tells Us

The Bank of Canada holding rates at 2.25% suggests they believe:

• Inflation is under control

• The economy is stable

• No immediate changes are needed

This is generally positive for variable rate holders and might make variable rates more attractive to buyers right now. However—and this is crucial—past stability doesn't guarantee future stability.

My Advice for Fraser Valley Buyers

After helping hundreds of families navigate this decision across Chilliwack, Abbotsford, Langley, and Mission, here's my honest take:

For most first-time buyers: Consider fixed. You're learning to manage a mortgage, property taxes, maintenance, and all the other costs of homeownership. Adding "rate volatility" to that learning curve can be overwhelming.

For experienced homeowners with equity: Variable might make sense. You have more cushion, you understand how mortgages work, and you can likely weather some rate increases if they come.

For anyone buying at the absolute top of their budget: Fixed, no question. Protect yourself.

The Hybrid Option Nobody Talks About

Here's a strategy many Fraser Valley buyers don't know about: splitting your mortgage.

Some lenders allow you to put 50% in a variable rate and 50% in a fixed rate. This gives you:

• Some protection if rates rise

• Some benefit if rates fall

• A built-in averaging strategy

It's like not putting all your eggs in one basket. You won't get the absolute best outcome in any scenario, but you won't get the absolute worst either.

Action Steps

If you currently have a variable rate mortgage:

1. Today's hold is good news, but don't get complacent

2. Review your budget for a 1-2% rate increase scenario

3. Consider switching to fixed if you can't handle increases (talk to your lender about penalties first)

4. Keep at least 3-6 months of mortgage payments in savings

If you currently have a fixed rate mortgage:

1. Nothing changes—continue as planned

2. Make note of when your term expires so you can evaluate options then

3. If you're within 120 days of renewal, start shopping rates now

If you're shopping for a mortgage right now:

1. Get quotes for both variable and fixed from at least three lenders

2. Calculate the monthly payment difference

3. Ask yourself: "If my payment increases by [that difference], would I be okay?"

4. Be honest about your risk tolerance and budget flexibility

5. Remember: the "best" rate isn't always the best choice

The Bottom Line

Today's rate hold at 2.25% is neutral news—it changes nothing for fixed rate holders and maintains the status quo for variable rate holders. The bigger question is which mortgage type aligns with your financial situation and peace of mind.

There's no wrong choice here, only the wrong choice for you. A variable rate that saves you $5,000 a year isn't a good deal if it causes $10,000 worth of stress and sleepless nights.

Need Help Deciding?

Navigating mortgage decisions in the Fraser Valley market can be complex, especially with properties ranging from $400,000 condos in Chilliwack to $1.5 million family homes in Langley. As your local real estate agent, I work with several excellent mortgage brokers who can run the numbers specific to your situation.

Whether you're buying your first home, upgrading, or refinancing, I'm here to help you make informed decisions that fit your goals—not just today, but for years to come.

Matt specializes in helping Fraser Valley buyers navigate complex real estate decisions with clarity and confidence. Serving Chilliwack, Abbotsford, Langley, Mission, Hope, and Agassiz.

Questions about how today's rates affect your home buying plans? Let's talk.