Canadian mortgage rates are expected to remain high through 2026, with a significant decline in fixed rates considered unlikely. The Bank of Canada's policy rate is forecast to hold at 2.25% for the remainder of 2026 by most major banks, though market expectations point to potential increases in 2027. Fixed mortgage rates, driven by Government of Canada bond yields, have already risen and are projected to climb further over the coming years. Understanding these forecasts is crucial for homeowners facing renewal and prospective buyers in Canada's housing market.
Current Mortgage Rate Environment in Canada
As of late 2026, the Canadian mortgage landscape is defined by a stable Bank of Canada policy rate and rising fixed mortgage costs. The Bank of Canada has held its overnight target rate at 2.25% for seven consecutive decisions, with the most recent hold occurring on September 2, 2026. This policy rate directly influences lenders' prime rates, which have remained at 4.45% for most major financial institutions, excluding discounts offered on variable mortgage products. In contrast, fixed mortgage rates are experiencing upward pressure due to movements in the bond market. The five-year Government of Canada bond yield, a key benchmark for fixed mortgage pricing, reached a 52-week high near 3.73% in late September 2026. This divergence means variable rates are expected to stay stable in the near term, while fixed rates have already increased, with all Big Six banks raising select fixed mortgage offerings in recent weeks.
Bank of Canada Policy Rate Forecasts
Forecasts for the Bank of Canada's policy rate through 2026 and beyond show a consensus for stability with a risk of increases. Most of Canada's largest banks, including RBC, TD, and BMO, expect the policy rate to end 2026 at 2.25%. Scotiabank and National Bank project a slightly higher year-end rate of 2.50%. Looking further ahead, financial market expectations derived from the CORRA forward curve indicate a gradual climb for the overnight rate, reaching roughly 3.25% by the end of 2027 and 3.50% through 2028. This market-implied path suggests the current rate of 2.25% acts as a practical floor. The central bank itself estimates Canada's neutral rate, which neither stimulates nor slows the economy, to be in a range of 2.25% to 3.25%, placing the current rate at the lower end of that band. This positioning limits the potential for further cuts unless the economy weakens significantly, while leaving room for increases if inflationary pressures broaden.
The Bank of Canada's decisions remain highly data-dependent, with future moves contingent on key economic indicators. The central bank may consider raising interest rates if headline inflation, driven by factors like sustained high energy prices, remains above its 1-3% target range and if inflation expectations among businesses and consumers continue to rise. Conversely, rate cuts could be considered if the economy weakens substantially, particularly if a U.S. trade war significantly damages growth, and if core inflation measures fall convincingly back towards the 2% target. Governor Tiff Macklem has stated the bank will act to nudge inflation back towards target if it does not look likely to decline on its own. The next scheduled interest rate announcement is set for October 28, 2026, with money markets as of early October pricing in about a one-in-four chance of a quarter-point hike at that meeting.
Fixed and Variable Mortgage Rate Predictions
Predictions for fixed and variable mortgage rates follow different paths, influenced by distinct economic drivers. Variable mortgage rates are directly tied to the Bank of Canada's policy rate and lenders' prime rates. With the policy rate expected to hold at 2.25% through the end of 2026 by most forecasts, variable rates are also projected to remain stable in the near term. The lowest available five-year variable rate was around 3.45% as of June 2026, reflecting a discount below the typical prime rate of 4.45%. Fixed mortgage rates, however, are not set by the Bank of Canada but are primarily driven by Government of Canada bond yields. These yields have risen due to global inflationary risks and geopolitical tensions, leading to higher fixed mortgage costs. Based on forward market pricing, the lowest available five-year fixed rate, currently around 4.44%, is projected to reach roughly 4.63% by the end of 2027 and approximately 4.90% by the end of 2030.
The economic context for these predictions includes several specific factors. A geopolitical energy shock that began in late February 2026, involving the closure of the Strait of Hormuz, drove global oil prices higher and pushed Canadian headline inflation to 3.1% in September 2026, above the Bank's target range. While core inflation measures have remained closer to target, the risk of energy-driven inflation spreading into broader price increases is a key concern. Furthermore, Canada's economic growth showed unexpected strength in the second quarter of 2026, with real GDP growing at an annualized rate of 3.3%, the fastest pace in over three years. This firming growth, combined with persistent inflation risks, supports the outlook for stable or rising interest rates rather than cuts. The overall takeaway for borrowers is that the risk to mortgage rates is skewed to the upside, with limited room for declines barring a significant economic downturn combined with easing oil prices.
Impact on Homeowners and the Housing Market
The forecasted mortgage rate environment has direct and significant consequences for Canadian homeowners and the broader housing market. By the end of 2026, approximately 33% of Canadian mortgage holders are expected to face higher monthly payments upon renewal. Of those facing an increase, about 75% hold five-year fixed-rate mortgages. For borrowers renewing a fixed-rate mortgage in 2026, payment increases are projected to average around 20%, reflecting the transition from the ultra-low pandemic-era rates to today's higher borrowing costs. The impact varies for variable-rate mortgage holders. Roughly 10% of borrowers renewing a variable-rate mortgage could see payments rise by more than 40%, while about 25% might see payments fall by at least 7%, depending on how they managed their payments during the recent rate hike cycle. This renewal stress is beginning to manifest in economic data.
Equifax Canada reported that severe mortgage delinquency rates, defined as payments 90 or more days past due, reached 0.30% of balances in the second quarter of 2026, a 33.8% increase from a year earlier. Ontario and British Columbia were highlighted as outliers, with missed payments on non-mortgage debt among Ontario mortgage holders rising by 27%. Equifax also reported that insolvencies have reached their highest rate since 2009, with a sharp increase among homeowners. The housing market transaction volume is also adjusting to the higher rate environment. The Canadian Real Estate Association forecasts that approximately 444,530 residential properties will trade hands via MLS Systems in 2026, representing a 5.2% decline from 2025. National Bank has suggested that home prices could stabilize in 2027 as mortgage rates approach their peak.
Key Economic Drivers and Data to Watch
Several key economic indicators will determine whether the current mortgage rate forecasts hold or shift in the coming months. The most critical data point is inflation, specifically whether the energy-driven price increases seen in 2026 broaden into other sectors of the economy. The Bank of Canada closely monitors both headline inflation and its preferred core measures, such as the three-month annualized rate, which rose from 2.3% in August to 2.6% in September 2026. Employment and GDP growth figures are equally important. While second-quarter 2026 growth was strong, early data for the third quarter showed a slowdown, with real GDP unchanged in July and a preliminary estimate of a 0.2% gain for August. Global factors, particularly the resolution of geopolitical conflicts affecting oil supply and the ongoing U.S.-Canada trade relationship, will also heavily influence the Bank of Canada's decisions. A definitive end to the Middle East conflict could ease global inflation concerns, but current analysis suggests oil supply restrictions may persist.
Historical Context and Long-Term Trends
Understanding current mortgage rate forecasts requires context from recent history and long-term trends. From 1980 to 2021, Canada experienced a prolonged period of generally declining interest rates, driven initially by the control of 1970s inflation and later by the disinflationary effects of globalization. This trend reversed sharply in 2022 and 2023 when post-pandemic inflation and a tight labour market forced the Bank of Canada to begin an aggressive hiking cycle, raising the policy rate to 5% by July 2023. As inflation pressures eased, the Bank then cut rates steadily through 2024 and 2025, bringing the policy rate down to 2.25% by late 2025. The year 2026 introduced a new shock with a geopolitical event that disrupted global oil supplies, pushing headline inflation higher and altering the rate outlook. This history illustrates that while rates may fluctuate with economic cycles, they are unlikely to return to the historic lows seen during the pandemic, given the current estimates for the neutral rate and ongoing inflationary pressures.
Comparing Major Bank Forecasts
Canada's major financial institutions have published their interest rate outlooks, revealing a general consensus on near-term stability with divergence on the timing of future increases. The table below summarizes the policy rate forecasts from several major banks for the end of 2026 and their projections for 2027. The common thread across all forecasts is that none of the major banks are currently predicting further rate cuts in the near term. The debate centres solely on how much higher rates might go and how quickly they will rise. TD and BMO represent the most cautious outlook, expecting the Bank of Canada to hold the policy rate at 2.25% straight through 2027. RBC projects the most aggressive increase, forecasting a rise to 3.25% by the end of 2027. This split reflects differing interpretations of how persistent inflationary pressures will be and how the economy will respond to global trade tensions and energy market volatility.
| Financial Institution | Policy Rate Forecast (2027) |
|---|---|
| RBC | 3.25% (by end-2027) |
| TD Economics | 2.25% (held through 2027) |
| BMO | 2.25% (held through 2027) |
| Scotiabank | 3.00% (by end-2027) |
| CIBC | 2.75% (in 2027) |
| National Bank | 2.75% (in 2027) |
Frequently asked questions
What is the Bank of Canada interest rate forecast for 2026?
The Bank of Canada interest rate forecast for 2026 is for stability at the current level. RBC, TD, and BMO all forecast the policy rate to end 2026 at 2.25%. Scotiabank and National Bank project a slightly higher year-end rate of 2.50%. Financial markets, as implied by the CORRA forward curve, also see the 2.25% rate as a floor, with expectations for gradual increases beginning in 2027 rather than within the 2026 calendar year.
What are the predictions for mortgage rates in 2027?
Predictions for mortgage rates in 2027 point to a gradual increase. The Bank of Canada's policy rate is forecast by financial markets to reach roughly 3.25% by the end of 2027. Correspondingly, fixed mortgage rates are expected to rise, with the lowest available five-year fixed rate projected to reach approximately 4.63% by the end of 2027. Variable mortgage rates would also increase if the Bank of Canada raises its policy rate as expected.
What happens when my mortgage renews in 2026?
When a mortgage renews in 2026, many borrowers will face higher payments. Approximately 33% of mortgage holders renewing in 2026 are expected to see increased monthly costs. For those with five-year fixed-rate mortgages, which constitute about 75% of borrowers facing an increase, the average payment increase is projected to be around 20%. Borrowers with variable-rate mortgages may see a wider range of outcomes, with some seeing significant increases and others potentially seeing decreases, depending on their payment history during the recent rate hike cycle.
What economic factors are affecting mortgage rate predictions?
Mortgage rate predictions are primarily affected by inflation, economic growth, and geopolitical events. Headline inflation, driven higher by energy prices due to geopolitical conflict, was 3.1% in September 2026, above the Bank of Canada's target. Economic growth showed strength in Q2 2026 but is slowing. Additionally, global bond market movements, trade tensions with the U.S., and domestic employment data all contribute to the interest rate outlook set by the Bank of Canada and the bond yields that drive fixed mortgage rates.
Will mortgage rates go down in 2026 in Canada?
A significant decline in mortgage rates is considered unlikely for 2026. Most major bank economists, including those from RBC, TD, and BMO, forecast the Bank of Canada's policy rate to hold at 2.25% through the end of the year, which would keep variable mortgage rates stable. Fixed mortgage rates, however, are influenced by Government of Canada bond yields and have already been climbing. The five year Government of Canada bond yield hit a 52 week high in late September 2026, pushing fixed rates higher. Furthermore, the lowest five year fixed rate is projected to increase from around 4.44% to roughly 4.63% by the end of 2027, indicating upward pressure rather than a decline.
How do fixed and variable mortgage rate forecasts differ?
Fixed and variable mortgage rate forecasts differ primarily in their underlying drivers and their projected paths. Variable rate forecasts are directly tied to the Bank of Canada's policy rate, which most major banks expect to hold at 2.25% through 2026, suggesting near term stability for variable rates. In contrast, fixed rate forecasts are driven by Government of Canada bond yields, which move independently in anticipation of economic conditions. These bond yields have risen significantly, reaching a 52 week high in late September 2026, causing fixed mortgage rates to increase already. Market expectations point to further increases, with the lowest five year fixed rate forecast to reach about 4.90% by the end of 2031, highlighting a clear divergence from the stable variable rate outlook.
Sources and further reading
- Mortgage Rate Forecast (2026 to 2030) truenorthmortgage.ca
- Canada Interest Rate Forecast (2026 to 2030) ratehub.ca
- Mortgage Rates Forecast Canada 2026 to 2030 nesto.ca
- Latest Forecast Tables, TD Economics economics.td.com
- Canada Mortgage Interest Rate Forecast: 2027 to 2031 wowa.ca
This article explains how things work and is not financial, tax or legal advice. Rules, limits and rates change, so check the current figures with the Canada Revenue Agency, your province or your financial institution before you act.