Canadian Mortgage Rate Forecast Update For 2026 and Looking Ahead to 2027
What are Canadian mortgage rates going to do in 2026? Our overall view has not changed materially. We continue to expect mortgage rates to remain within a relatively normal range compared to the extreme variability experienced between 2021 and 2024. While there is no consensus among economists regarding the direction if interest rates, the consensus view is that any future changes are likely to be gradual rather than dramatic.
There are varying views about the direction the Bank of Canada will take in the coming months, but most analysts are not expecting any material moves and they are split whether the next move is a rate hike or a rate cut. The outcome of the difficult trade negotiations with the US may be a determining factor.
The bigger story may not be the Bank of Canada at all. Bond markets around the world are facing upward pressure from persistent government borrowing, elevated debt levels, and concerns that inflation could remain above target. Japanese 10-year bond yields recently reached over 32% for the first time since 1996. US 10-year bond yields are over 4%, and now approaching 5%, a level that can cause economic discomfort. Canada is not immune to these forces. Even if the Bank of Canada holds rates steady, higher government bond yields could place upward pressure on fixed mortgage rates.
Predictions are difficult and the markets are sending mixed signals right now. Read on to find out what this might all mean?
2026 Updated Mortgage Rate Prediction
Mortgage rates should remain within a close range near current rates for the remainder of 2026. Variable mortgage rates will follow the Bank of Canada rates, which are expected to remain flat to the end of the year. Bond yields could fluctuate with economic news, and fixed mortgage rates will follow but are likely to remain within the high-3% to mid-4% range, absent any significant economic surprises.
2027 Mortgage Rate Forecast
Variable Mortgage Rates in 2027
Variable mortgage rates are now below fixed mortgage rates and should remain there for the time being. The gap could increase if variable rates remain steady in the coming months and bond yields increase further. We expect variable mortgage rates to remain stable for the balance of 2026 and into the early part of 2027. If the Bank of Canada starts increasing rates in Q1 or Q2 2027 we will see variable mortgage rates increase as well. We anticipate five-year variable mortgage rates for the best borrowers to range from 3.4% to 4.2% through the remainder of 2026 and for all of 2027.
The Bank of Canada has maintained its overnight rate at 2.25% throughout 2026. We expect that to continue into early 2027. The debate among economists is no longer whether rates cuts are needed, but whether the next move will be a rate hike.
Most economists expect Bank of Canada policy rates to remain relatively low by historical standards, through 2027. However, several of our major banks are forecasting modest increases during 2027 as economic growth recovers and inflation risks persist. The current bank forecasts (as of Aug 31, 2026) are:
| Bank | Q3’26 | Q4’26 | Q1’27 | Q2’27 | Q3’27 | Q4’27 |
|---|---|---|---|---|---|---|
| TD | 2.25 | 2.25 | 2.25 | 2.25 | 2.25 | 2.25 |
| BMO | 2.25 | 2.25 | 2.25 | 2.25 | 2.25 | 2.25 |
| CIBC | 2.25 | 2.25 | 2.25 | 2.50 | 2.75 | 2.75 |
| National Bank | 2.25 | 2.25 | 2.50 | 2.75 | 2.75 | 2.75 |
| Desjardins | 2.25 | 2.25 | 2.50 | 2.75 | 2.75 | 2.75 |
| Scotiabank | 2.25 | 2.75 | 3.00 | 3.00 | 3.00 | 3.00 |
| RBC | 2.25 | 2.25 | 2.50 | 2.75 | 3.00 | 3.25 |
It is worth noting that not one of the banks expects any rate cuts by the Bank of Canada between now and the end of 2027. The average expectation for the end of 2027 is that the policy rate will be 2.75%, which is 0.50% higher than today.
Fixed Mortgage Rates in 2027
In our view, the odds of fixed mortgage rates declining in late 2026 or early 2027 remain low unless there is a significant economic slowdown in Canada. The most likely scenario is that fixed mortgage rates remain in a fairly narrow range with the potential for moves to the higher end of that range as bond markets react to economic data and inflation reports.
While we do not expect a significant change in fixed mortgage rates for the balance of 2026, there is a risk that fixed rates could move modestly higher. While Canadian five-year bond yields are 0.40% higher than at the start of the year, lenders have held rates relatively stable. Nevertheless, any further upward rate pressure is likely to force them to move higher as well. We anticipate five-year fixed mortgage rates for the best borrowers to range between 3.9% and 4.7% for most the balance of 2026 and all of 2027.
Fixed mortgage rates have moved up and down through 2026 and are now slightly higher than they were at the beginning of 2026. Five-year fixed-rate mortgage products are 0.10% to 0.20% higher than at the start of the year and three-year fixed-rate mortgage products are flat on the year. Recent increases in bond yields have forced most lenders to raise rates through the end of August and that trend could continue.
We rely on market inputs to generate our own expectations for mortgage rates in 2026. Those key inputs include:
- The Bank of Canada has indicated the current overnight rate of 2.25% is “about right” to keep inflation near 2%, but stands ready to respond if needed;
- Economists are forecasting moderate Canadian economic growth, albeit subject to successful trade negotiations with the US;
- The US 10-year Treasury yield has hovered around 4.8% in early September 2026, 0.60% higher than at the beginning of the year;
- Canadian 5-year bond yields are around 3.3% in early September 2026, higher on the year with signs of further upward pressure; and
- Excessive government borrowing and overall debt levels puts pressure on bond yields to rise to entice investors to buy the large volume of government debt and satisfy concerns about long-term economic uncertainty.
There are many risks that are not priced in yet that could materialize. Economic weakness or tariff impacts could prompt more rate cuts and lower bond yields. Economic strength or resurgent inflation could lead to hikes and higher rates. There are also political and geopolitical risks that are making headlines that are not in our area of expertise. Bond yields have moved higher around the world, and Canadian bond markets tend to follow the broader global trends.
What Interest Rates Affect Mortgage Rates?
There are two key underlying market rates that mortgage borrowers should be aware of - the Prime Rate (influenced by Bank of Canada overnight policy rate) and five-year government bond yields.
The Prime Rate
The prime rate is defined as the interest rate commercial banks charge their most credit-worthy customers. It serves as a benchmark rate for setting the rates on a variety of financial products, including mortgages, personal loans, and lines of credit. The prime rate is influenced by several factors, including inflation, economic growth, and the supply and demand for credit.
The prime rate is determined by the banks themselves, and it is typically set at a level that is 1.5 to 2.5 percentage points above the overnight target rate set by the Bank of Canada. The prime rate is currently 4.45%, as of September 1, 2026.
The Five-Year Government of Canada Bond Yield
There are a variety of Canada government bonds that trade daily in the bond market. They have terms to maturity ranging from overnight to 30-years. The five-year Canada bond is a benchmark pricing bond for mortgages. This is because mortgage funding vehicles like mortgage-backed securities are priced off this bond.
The bond market sets the price of the bonds, and the bonds are forward looking. This means their current price is largely based on bond investor expectations for the future economic prospects of the country that issued the bonds. Factors like economic growth, employment and inflation influence the price of the bonds. The five-year government of Canada bond yield is currently 3.35%% (as of September 1, 2026), which is about 0.40% above where it was at this time in early January 2026.
Recent Canadian Interest Rate History
Rates have been lower than historical averages since the economy exited from the 2008-2009 financial crisis. There have been some ups and downs, but central banks held rates low for an unusually long time from 2010 to 2022. Not only had rates been held lower during the period of recovery from the financial crisis, but the reduction of rates in response to the Covid lockdowns went further and was unprecedented.
Unfortunately, an extended period of low rates combined with massive government stimulus in response to Covid lockdowns fueled a period of inflation. Central banks failed to anticipate inflation and were forced to rapidly increase rates in 2022 once it took hold. The Bank of Canada raised their target interest rate by 4.0% in 2022, the largest ever one-year increase. They raised it another 0.75% in 2023.
Being a predictor of the future, the bond market responded to inflation as well and bond yields rose in 2022 and 2023. This pushed fixed mortgage rates higher.
The Bank of Canada made their first cut in four years on June 5, 2024. Eight more cuts, totaling 2.75% have been made since then by the Bank of Canada. Bond yields declined in 2024 and have levelled off, before slowly rising in 2026. The five-year Canada bond yield moved above 3% after the conflict with Iran started and has remained there since.
What Have Mortgage Rates Done Recently?
Fixed mortgage rates declined modestly in early 2026 but rose in March 2026. After a period of relative stability, fixed mortgage rates have moved higher in recent weeks. but have flattened out in recent months. The best five-year fixed, insured mortgage rates are now 3.99% to 4.09%, depending on location.
Variable mortgage rates declined by 1.00% in 2025 due to the rate cuts by the Bank of Canada and have held steady through 2026. Slight improvements in variable mortgage rates were seen through 2026 with some lenders as they became more competitive and lowered their margin expectations. The best five-year variable, insured mortgage rates are now 3.40%. Variable rates will only change materially in response to Bank of Canada rate adjustments.
Will Mortgage Rates Decline in Canada in late 2026 or 2027?
We do not anticipate any decline in mortgage rates in 2026. We expect fixed mortgage rates to move around within a range, with the potential to move higher. We expect variable mortgage rates to remain steady for the balance of the year. There are some analysts predicting that the Bank of Canada could hike rates in 2027, causing variable mortgage rates to also increase, but this cannot be predicted with any certainty. There are many pundits and bank analysts that are paid to make predictions. It is a difficult game, and they are wrong more often than they are right.
If this majority view of relatively stable rates for the rest of 2026 is accurate then borrowers can expect stable mortgage rates but should be prepared for any move in rates to be higher. A return to the abnormally low rates we experienced in recent years is not likely. Absent any sudden economic shock, bond yields will tend to range between 2% and 4% over time. The five-year Canada bond yield today (September 1, 2026) is 3.35%. We are currently in a relatively normal interest rate environment.
Could Mortgage Rates Increase in Canada in late 2026 or 2027?
Yes, it may be possible that mortgage rates increase slightly toward the end of the year. If the bank analysts’ views on interest rates are accurate then a significant increase in mortgage rates is unlikely, although some minor movement up and down is possible with fixed mortgage rates. The main risks to these forecasts are i) the possibility that inflation picks up due to tariffs or other factors, ii) economic strength could push up bond yields and prompt central bank hikes, or iii) trade negotiations go poorly, reducing economic output and confidence.
How Can You Stay Informed About Interest Rates?
The Bank of Canada interest rate announcements are news to keep an eye on. They make these announcements on preset dates. There are three such announcements left in 2026, on September 2, October 28, and December 9.
The schedule for Bank of Canada rate announcements for 2027 is:
- Wednesday, January 27
- Wednesday, March 3
- Wednesday, April 28
- Wednesday, June 2
- Wednesday, July 21
- Wednesday, September 8
- Wednesday, October 27
- Wednesday, December 8
If you would like to keep track of the five-year government of Canada bond you can track it for free on the internet. There are many websites that let you do this, and an online search will help you find one. Here is a link to one such site -
https://www.marketwatch.com/investing/bond/tmbmkca-05y
For current mortgage rates you can go to frankmortgage.com/mortgage-rates to see our mortgage rates that are updated daily.
You can also sign up for our monthly mortgage market update email. It provides a summary of monthly activity in the mortgage and housing markets, including an update on interest rates.
Mortgage Rate Advice for 2027
Mortgage borrowers today are facing a stable environment compared to the past few years. This is good news. The emergency-level rates that followed the pandemic are long gone. The rapid tightening cycle of 2022 and 2023 is also behind us. Mortgage rates are down from the highs in 2023. A stable rate environment is a sign the market is settling and perhaps a return to normal is around the corner.
With steady rates and housing prices down in several markets, housing affordability has improved. We talk to many customers that are stressed about their mortgage renewal or are bogged down in the math. Things are not as complicated as they seem, especially if you acknowledge how much things have improved since 2023.
Rates may hold or rise slightly in 2027 and waiting for further rate declines can lead to frustration. Find out what you can afford at current rates and act on it.
Variable-rate mortgages are not for everyone. As many have painfully learned over the past few years they come with risk. The risk of higher rates over the next few years exists, so only consider variable rates if you can afford to bear that risk or need the flexibility to break the mortgage in the future (prepayment penalties are lower for variable-rate mortgages).
Fixed rates have settled into a range, but there is risk of increases in the coming months. They could decline but that is only likely in response to economic weakness - a poor outcome to the US trade negotiations may make that scenario more likely. The past year has seen many borrowers go for shorter terms but as we are now at the end of the rate cutting cycle it might be time to consider taking the longest term you can afford.
We are optimistic for a more active housing market in late 2026 and into 2027, but challenges persist. Urban condominium markets may continue to struggle. Detached housing looks to be in better health. Supply has increased in many markets and homebuyers that have their mortgage financing arranged ahead of time stand to benefit.
Our Current Mortgage rate Outlook
As we look ahead to 2027, our expectations are:
- Variable mortgage rates offer the best value and are likely to remain relatively stable, with the potential for gradual increases during 2027.
- Fixed mortgage rates are likely to remain range-bound but face upward pressure from global bond markets.
- A return to an ultra-low-interest rate environment is highly unlikely.
- Any material decline in mortgage rates would likely require a meaningful economic slowdown (be careful what we with for).
- Mortgage borrowers should make decisions based on today’s rates rather than hoping for dramatically lower rates in the future.
- We expect most customers to continue to favor fixed rates due to an aversion to interest rate risk and the predictability of fixed payments. The gap between fixed and variable has grown recently however, so we are seeing a pick-up in variable-rate mortgage interest. However, finding a fixed mortgage rate you can afford and then putting it away for five years so you do not have to worry about rates may be your best choice.
We caution all customers to take interest rate predictions with a grain of salt. The bank analysts that make market predictions like those noted above were correct about some cuts in 2025 but got it wrong in 2024, 2023 and 2022. What are the odds they get it right this year? Do your own research and seek out opposing views to get the whole picture to inform your own opinions and decisions.
Most importantly, we encourage borrowers to focus on affordability, risk tolerance, and long-term financial goals rather than attempting to perfectly predict interest rates or time the market. We are here to help you navigate the mortgage market and find your best mortgages. Please click below to find our best rates.
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Frequently Asked Questions
1. Where are interest rates likely headed over the next 12 months?
While no one can predict interest rates with certainty, most economists expect the Bank of Canada to move rates higher in 2027. Analysts also caution that the risk of fixed bind yields rising is greater than the chance they may decline. Future rates will be influenced by inflation, economic growth, employment trends, and global events. Borrowers should focus on their financial goals rather than trying to perfectly time the market.
2. Will mortgage rates fall significantly in the near future?
A significant decline in mortgage rates in the near future does not appear likely. Rates may decline if broader economic growth weakens. Absent that, the market expects rates to increase in 2027. Homebuyers and homeowners should evaluate current affordability rather than relying solely on expectations of lower future rates.
3. Should I choose a fixed-rate or variable-rate mortgage right now?
The right choice depends on your financial situation and risk tolerance. A fixed-rate mortgage provides predictable payments and protection against the very real risk of future rate increases, while a variable-rate mortgage may offer flexibility and benefit you if rates move lower. Fixed rates remain the most popular, but the lower variable rates improve affordability for those that can tolerate the interest rate risk. Consider your budget, income stability, and comfort with potential payment fluctuations.
4. What should homeowners do if their mortgage is coming up for renewal?
Start planning several months before your renewal date. Review your budget, compare offers from multiple lenders, and consider whether you need payment stability or additional flexibility. The best time to restructure your financing to optimize your monthly payment and total debt is at renewal since there will be no prepayment penalties to do so. Speaking with a mortgage professional early can help you understand your options and avoid last-minute decisions.
5. What is the best strategy for buyers and homeowners in an uncertain rate environment?
Focus on what you can control. Maintain a healthy emergency fund, avoid stretching your budget to the maximum, and choose a mortgage solution that aligns with your long-term goals. Understand the impact of rising rates if you want a variable-rate mortgage. Do not try to time the market. If there is a homebuying opportunity that appeals to you that you can afford, don’t be afraid of acting on it. The best mortgage decision is often the one that remains affordable and sustainable, regardless of how rates move in the future.
