Will Canadian Mortgage Rates Go Down in 2026? What Experts Are Predicting

March 27 2026

Will Canadian Mortgage Rates Go Down in 2026? What Experts Are Predicting

For years, Canadian homeowners and hopeful buyers have been riding a mortgage rate rollercoaster. From the ultra-low rates of the pandemic to a series of aggressive hikes, everyone is looking for signs of what's next. So, the question on many people's minds is: "Will Canadian mortgage rates go down in 2026?"

While no one can predict the future with 100% certainty, we can examine current economic data and the forecasts of major financial institutions to get a clearer picture of the likely path forward.

The Short Answer: A Period of Stagnation and "Hold"

Based on current forecasts, the most likely scenario for 2026 is not a significant decrease in mortgage rates. Instead, experts are predicting a period of relative stability, with interest rates likely to hold at or near current levels.

The consensus among major Canadian banks is that the Bank of Canada (BoC) will pause its rate-cutting cycle and maintain its key policy rate through 2026. This means that variable mortgage rates will likely remain stable, and fixed rates will see only modest, gradual increases depending on bond yields.

Essentially, 2026 is shaping up to be a year of "wait and see" as the economy continues to adjust.

The Key Driver: The Bank of Canada's Balancing Act

The single biggest factor influencing mortgage rates is the Bank of Canada. In its most recent announcement in March 2026, the Bank held its key policy interest rate at 2.25%. Its decision is a delicate balancing act focused on two main goals:

1. Controlling Inflation

The BoC has a target to keep inflation around 2%. While inflation has been trending down from its peak, it remains stickily above the target, coming in at 2.6% for January 2026. Lowering rates too quickly could reignite inflationary pressures.

2. Supporting a Subdued Economy

Conversely, Canada's economic growth (GDP) is forecasted to be weak in 2026, with some estimates as low as 0.7% to 1.1%. A softening labour market, with unemployment rising to 6.7%, also points to a weaker economy. Typically, this would be a reason to cut rates to stimulate spending.

Because these two forces are pulling in opposite directions, the BoC's strategy is to hold rates steady to monitor the impact of previous cuts and ensure inflation stays on its downward path before making any further moves.

What Does This Mean for Your Mortgage Type?

It's important to understand how this "rate-hold" stance affects different kinds of mortgages.

Variable-Rate Mortgages

If you have a variable-rate mortgage, your payments are directly tied to the prime rate, which moves with the Bank of Canada's policy rate. Since the BoC is expected to hold, your payments should remain stable for the foreseeable future. Many forecasters believe we've seen the end of rate cuts for this cycle, meaning you shouldn't expect significant payment relief, but you also shouldn't face any surprises. Interestingly, for the first time in years, some variable rates are priced better than fixed rates.

Fixed-Rate Mortgages

Fixed mortgage rates are influenced by Government of Canada 5-year bond yields, not the BoC's overnight rate. Bond yields are more volatile and are driven by market expectations. While some expect yields to remain relatively stable, others predict a gradual increase from a low of 2.80% to as high as 3.25% by the end of 2026. As a result, you could see modest, gradual increases in fixed mortgage rates, although a sharp spike is unlikely.

The Broader Context: Housing and Renewals

This stable, but still relatively high-rate environment, is having a noticeable impact on the Canadian real estate market.

Housing Market Outlook

TD Economics recently slashed its housing forecast for 2026. After initially predicting gains, it now expects national home sales to fall 1.8% and average prices to edge 0.3% lower. The biggest declines are concentrated in Ontario and B.C., where high prices and cost-of-living pressures are keeping many buyers on the sidelines as they wait for the market to bottom out.

The Mortgage Renewal Wave

A major concern is that approximately 33% of Canadian mortgage holders are expected to face higher monthly payments when their mortgages renew by the end of 2026. For those with 5-year fixed-rate mortgages, who took advantage of ultra-low pandemic rates, payment increases are expected to average around 20%. This reset to higher borrowing costs will continue to put a strain on household budgets.

Factors That Could Change the Forecast

It's important to remember that these are forecasts, not guarantees. Several factors could unexpectedly shift the trajectory of interest rates:

• Geopolitical Risks: Ongoing conflicts in the Middle East or changes in the global trade landscape could cause unexpected economic shocks.
• New Tariffs: New trade barriers, like those from the US, could disrupt the Canadian economy and force the BoC to react.
• Surprising Economic Data: If inflation falls faster than expected or if the economy hits a more severe recession, the BoC might cut rates. Conversely, if the economy proves unexpectedly resilient, rates could hold or even rise.

Conclusion: Plan for Stability, But Stay Alert

The base case for 2026 is that Canadian mortgage rates will not see a significant decrease. The era of ultra-low rates is over for now, and the market is entering a phase of stability.

For current homeowners: If your mortgage is up for renewal, prepare for the likelihood of higher payments. Use a mortgage calculator to explore different scenarios.

For hopeful buyers: While prices in some markets may soften, the cost of borrowing will remain a significant factor. It’s a good time to get pre-approved and work on your budget.

As always, the best course of action is to consult with a Mortgage Managers broker. We can analyze your specific situation, provide personalized advice, and help you navigate the ever-changing landscape of Canadian real estate and financing.