Mortgage Interest Rate Predictions for 2026 in Canada

As we head into 2026, Canadian homeowners and prospective buyers face a mortgage rate landscape shaped by central bank policy, inflation dynamics, and global economic trends. After a long period of rate increases in previous years, the interest rate outlook has become more nuanced — and understanding it is key to planning your mortgage strategy.

Here’s our expert-informed outlook on where mortgage interest rates in Canada are headed in 2026.

Current Context: Where Rates Stand Today

As of December 2025, the Bank of Canada has held its policy interest rate at 2.25% — a level that has remained steady through the end of 2025 after a series of earlier cuts. The prime rate for consumers sits around 4.45%. (TechStock²)

This policy pause reflects the Bank’s view that inflation is close to target and that the current rate level remains appropriate, though future moves will depend on economic data. (TD Stories)

Economist & Market Forecasts for 2026

1. Bank of Canada Policy Rate Outlook

Forecasts for the Bank of Canada’s key policy rate in 2026 vary:

• Some major banks and analysts expect the policy rate to remain at 2.25% throughout most — or all — of 2026. (True North Mortgage)

• Other forecasts anticipate a gradual increase later in the year, with projections toward 2.50% by late 2026, potentially reaching 2.75% depending on inflation and economic strength. (Perch)

• A few forecasts suggest the BoC may initiate a tightening cycle in the second half of 2026, influenced by stubborn inflation or stronger-than-expected GDP growth. (Perch)

  
  

2. Market-Based Rate Expectations

Forward market pricing and mortgage rate forecast models suggest:

• Fixed mortgage rates, including popular five-year products, are expected to remain above 4% and may rise toward the 4.8–5.2% range by mid-to-late 2026. (ASK ROSS)

• Early in 2026, mortgage rates may stay relatively stable before shifting higher later in the year. (ASK ROSS)

Importantly, these forecasts reflect typical five-year fixed rates — variable and shorter terms may behave differently depending on lender pricing and market conditions.

What This Means for Homeowners & Buyers

Existing Homeowners / Renewals

If you’re approaching a mortgage renewal in 2026:

• Locking in a five-year fixed rate earlier in the year may secure a more attractive rate before potential increases later in 2026.

• For variable-rate mortgages, the steady policy rate environment may keep payments relatively stable in the first half, but you should be prepared for upward pressure if the Bank of Canada tightens policy later.

  
  

Homebuyers Shopping in 2026

For buyers planning to enter the market:

• Expect mortgage rate quotes that generally reflect the higher-for-longer narrative, especially on fixed terms.

• Don’t assume rates will fall significantly — while the Bank has paused cuts, a trend of increases later in 2026 could support modest rises in mortgage pricing.

Key Drivers to Watch in 2026

Three major forces will shape interest rate movements:

1. Inflation Trends — If inflation stays near or above target, the Bank may feel pressure to raise rates.

2. Economic Growth & Labor Market — Stronger GDP or tighter labor markets could push policy toward tightening, while weakness could reinforce the pause.

3. Global Interest Rate Dynamics — Moves by the U.S. Federal Reserve and other central banks influence Canadian long-term yields and mortgage pricing. (Reuters)

Bottom Line

✅ Expect 2026 to start with steady interest rates and relatively stable mortgage pricing.

📈 Later in the year, however, forecasts lean toward modest increases — especially if economic data supports tighter monetary policy.

🧠 Smart planning now — including locking in competitive terms and reviewing your mortgage strategy — can help you mitigate rate risk in 2026.