Mortgage Rates Forecast Canada 2026-2030
Canada’s mortgage rate forecast for 2026 suggests borrowing costs will remain relatively stable. The Bank of Canada (BoC) is largely expected to hold the policy interest rate at 2.25% throughout the year. As a result, variable mortgage rates in Canada are expected to remain unchanged, while fixed rates may increase slightly in line with Government of Canada (GoC) bond yields.
Many Canadian borrowers are coming up for renewal for the first time since interest rates began to rise in 2022, and most are likely to see significant increases in their mortgage payments. Borrowers should not expect further rate cuts in 2026 unless trade tensions with the US or global economic conditions significantly affect Canada’s economy. Financial markets have gone a step further and now price the Bank’s next move as an increase rather than a cut.
Key Takeaways
- The Bank of Canada is expected to hold the policy rate near 2.25% in 2026.
- Fixed mortgage rates will likely remain stable but may rise slightly if bond yields rise.
- Many borrowers renewing mortgages in 2026 will face higher monthly payments.
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Why Mortgage Renewals in 2026 Could Mean Higher Payments for 33% of Borrowers
By the end of 2026, approximately 33% of Canadian mortgage holders are expected to face higher monthly mortgage payments. Approximately 75% of borrowers facing a payment increase have 5-year fixed-rate mortgages. For those with fixed-rate mortgages renewing in 2026, payment increases are expected to average around 20%. This reflects the shift from ultra-low pandemic-era rates to today’s higher borrowing costs.
The experience will differ substantially for borrowers with variable mortgages. Those with adjustable-rate mortgages (ARM) have already absorbed most of the impact of past rate hikes and, based on current expectations for 2026 interest rates, many could begin to see some payment relief.
However, borrowers with variable-rate mortgages (VRM) may experience significant changes in their mortgage payments. 10% of borrowers renewing a variable-rate mortgage are projected to see payments rise by more than 40%. In comparison, roughly 25% could see their payments fall by at least 7%. This wide range largely reflects borrowers’ strategies for managing rising rates during the tightening cycle. Borrowers who increased their monthly payments to ensure principal and interest were covered are likely to face smaller adjustments at renewal. Meanwhile, borrowers experiencing negative amortization are likely to experience larger increases in their mortgage payments at renewal.
As of mid-2026, that stress is starting to show in the data. Equifax Canada’s first-quarter 2026 Market Pulse reported that mortgage delinquency balances were up about 32% from a year earlier nationally, and 52% higher in Ontario. However, the share of mortgages 90 or more days behind remains low at roughly 0.2%. Consumer insolvencies climbed to their highest level since 2009. Statistics Canada’s national balance sheet also shows the total dollar value of mortgage interest paid by households rising as renewals take hold, even though the mortgage interest costs (MIC) component of the Consumer Price Index has eased year-over-year. The two series measure different data, aggregate dollars paid versus the average annual price change, so both can move at once.
Canada Mortgage Rate Forecast for 2026 (Updated September 2026)
Canada’s mortgage rate outlook for 2026 depends largely on how quickly inflation stabilises and how the Bank of Canada responds to current economic conditions. Most economists at Canada’s largest banks expect borrowing costs to remain relatively stable over the year. However, mortgage rates could fluctuate throughout the year as economic data changes and financial markets adjust their expectations. Growth firmed sharply through the second quarter: Statistics Canada reported that real GDP grew 0.8% in the quarter, an annualised 3.3%, the fastest pace in more than 3 years. Exports rose 3.6% on a rebound in auto shipments. Business capital investment turned higher after five straight quarterly declines, with engineering structures up 2.3%. Residential investment rose 2.5% as resale activity warmed in Ontario, Quebec and British Columbia. The agency also revised first-quarter growth up to an annualised 0.3% from the flat reading first published, which means Canada did not enter a technical recession.
Canada’s external position strengthened at the same time. The current account swung from a revised deficit of $8.3 billion in the first quarter to a surplus of $8.8 billion in the second, the first surplus since 2022 and the largest since 2005, as the trade in goods balance moved from a $6.4 billion deficit to a $12.2 billion surplus on record energy and auto exports. Foreign investors bought a record $80.8 billion of Canadian government bonds over the same period, which matters directly for fixed mortgage rates because those bonds are the benchmark lenders price against.
The quarter came in well ahead of the roughly 2.5% the Bank of Canada projected in its July Monetary Policy Report. Even so, the Bank has left its full-year 2026 growth projection at 0.7%, reflecting the weak start to the year, while economists surveyed by Bloomberg have also kept their 2026 growth expectations near that level. Momentum has since faded: Statistics Canada’s advance estimate puts July output essentially unchanged from June, before the latest round of United States tariffs took effect on August 22. The August Labour Force Survey pointed the same way, with employment down 42,000 after 3 months of strong hiring, although the unemployment rate held at 6.4%.
Bank of Canada Policy Rate Forecast (Variable Rates)
Forecasts from the Big 6 Banks suggest that the overnight policy rate will remain stable at 2.25% for much of the year. By the end of 2026, most major banks predict rates will end the year at the same level as they began.
| Bank | Jun | Jul | Sep | Oct | Dec |
|---|---|---|---|---|---|
| BMO | 2.25% | 2.25% | 2.25% | 2.25% | 2.25% |
| CIBC | 2.25% | 2.25% | 2.25% | 2.25% | 2.25% |
| National Bank | 2.25% | 2.25% | 2.25% | 2.50% | 2.75% |
| RBC | 2.25% | 2.25% | 2.25% | 2.25% | 2.25% |
| Scotiabank | 2.25% | 2.25% | 2.25% | 2.50% | 2.75% |
| TD | 2.25% | 2.25% | 2.25% | 2.25% | 2.25% |
Government of Canada 5-Year Bond Yield Forecast (Fixed Rates)
Most forecasts from the Big 6 Banks expect bond yields to remain relatively stable through 2026. GoC 5-year bond yields are expected to rise from a low near 3% early in the year to around 3.25% by the end of 2026. As a result, fixed mortgage rates could gradually increase, although large increases are unlikely. Fixed mortgage rates in Canada may fluctuate modestly throughout the year as financial markets react to inflation and employment data, as well as shifts in global bond markets. Still, the overall trend is for rates to remain relatively stable. In early July, the 5-year GoC yield spiked to about 3.18%, a seven-week high, as renewed US-Iran tensions pushed oil and US Treasury yields up, before easing back to roughly 3.13% by July 10. That pressure returned in force through late July and into August, as the blockade of the Strait of Hormuz and the partial closure of Red Sea shipping routes lifted the yield back to around 3.18% to 3.23% in the first week of August, and on to a 12-month high near 3.36% by August 21. The main upward pressure on Canadian fixed rates remains imported rather than domestic, a dynamic explained further below.
That pressure has carried into September. The yield closed at 3.26% on August 26, then climbed back toward a 52-week high near 3.35% by September 1 and has held around that level since the Bank of Canada’s September 2 decision, which puts it above the year-end forecasts in the table below rather than below them. Canada’s weak August jobs report barely dented it. The funding benchmarks behind fixed pricing, the 4-year swap rate and the 5-year Canada Mortgage Bond rate, slipped only 1 and 3 basis points on the day, which is why a soft domestic report has delivered so little relief at the rate sheet. The shape of the curve has changed as well. The 1-year GoC yield sat near 2.67% in August, leaving the 5-year more than 60 basis points above it after several years in which shorter-term yields were generally higher. For a borrower comparing terms, that spread is the reason a shorter fixed term now prices below a 5-year fixed rate at most lenders.
| Bank | Q2 2026 | Q3 2026 | Q4 2026 |
|---|---|---|---|
| BMO | 3.15% | 3.05% | 2.95% |
| CIBC | 3.00% | 3.15% | 3.25% |
| National Bank | 3.20% | 3.15% | 3.15% |
| RBC | 3.10% | 3.20% | 3.30% |
| Scotiabank | 3.01% | 3.15% | 3.25% |
| TD | 3.10% | 3.00% | 2.95% |
Will Interest Rates Go Down in 2026?
The BoC Policy Rate decreased by 100 basis points (1 basis point equals 0.01%) in 2025. The Bank of Canada is expected to consider further rate cuts only if the economy shows significant weakness in 2026.
So far, most of the Big 6 Banks expect the policy rate to hold steady through 2026. Scotiabank and National Bank are the exceptions, with both projecting the rate rising to 2.75% by the end of 2026.
Changes in Government of Canada bond yields influence fixed mortgage rates, which respond to financial market expectations. Currently, market expectations suggest that rates, in particular the 5-year fixed rate, could increase slightly.
After the second-quarter data, economists broadly reaffirmed the hold, and the Bank delivered it on September 2. RBC expects the Bank of Canada to keep rates unchanged through the remainder of 2026, describing its base case as a gradual cyclical recovery and noting that the economy entered this period of trade disruption from a stronger starting point. Capital Economics cautioned that tariff headwinds make it unlikely the second-quarter pace will continue, pointing to the flat July advance estimate as evidence that growth was already losing momentum before the latest tariffs landed. Neither view supports a cut.
The August jobs report did not change that conclusion, though it did soften the language around a possible increase. Employment fell 42,000, and wage growth slowed to 2.0%, and Manulife Investment Management read the report as evidence that any signal of imminent increases was premature. CIBC took the same soft data as a reason for the Bank to stay on hold rather than move in either direction. Weak hiring argues against a hike well before it argues for a cut, because the unemployment rate is still more than half a percentage point below where it sat a year earlier.
Will There Be a Bank of Canada Rate Hike in 2026?
Most rate analysts predict that rates will stabilise and remain constant throughout 2026. The Bank of Canada Governing Council considers the current policy rate adequate to keep inflation around the 2% target and to support the economy. However, uncertainty remains high, and the outlook could shift in response to global economic developments.
The Bank of Canada held the policy rate at 2.25% on September 2 for a seventh consecutive time, as markets and all 35 economists in a late-August Reuters poll had expected. The decision came without a Monetary Policy Report; the next full forecast arrives October 28. The Governing Council said the economy and inflation had evolved broadly as projected in July, but flagged that upside risks to inflation have increased while new tariffs make growth prospects more uncertain. It gave no forward guidance beyond a readiness to adjust monetary policy as needed. In its June 10th Summary of Governing Council Deliberations, the Bank had signalled it would stay nimble, and its September 2 opening statement kept that stance while noting the Bank cannot offset the effects of tariffs or influence global energy prices.
A hike is now the more live question than a cut, and the 2 groups that set prices disagree about it. Money markets are pricing in a partial increase for the December 9 decision and roughly 100 basis points of increases over the coming 12 months. Most bank economists still see the policy rate frozen at 2.25% through 2026, with the first increase arriving in 2027, and Capital Economics has moved its own first-hike call forward from June 2027 to as early as December 2026. That gap between market pricing and economist forecasts matters more to fixed-rate borrowers than the September hold itself, because bond yields follow what the market is pricing rather than what the consensus forecasts. The Bank publishes its summary of deliberations on September 16, and August inflation follows on September 14.
Fixed vs Variable Mortgage Rate Outlook in Canada
The outlook for fixed and variable mortgage rates in Canada can differ because each responds to economic forces at different times. Fixed mortgage rates tend to move first when financial markets anticipate changes in the economic outlook. Variable mortgage rates adjust after the Bank of Canada changes its policy rate.
Why Fixed and Variable Mortgage Rates Move Differently in Canada
Fixed mortgage rates are primarily influenced by the Government of Canada (GoC) bond yields of corresponding maturities. These bond yields move daily in response to global market conditions, US Treasury yields, economic growth outlooks, inflation expectations, and shifting expectations for policy rate decisions. If bond yields move in either direction, fixed mortgage rates follow.
Variable mortgage rates move more directly with the Bank of Canada’s overnight policy rate. The Bank reviews its policy rate at scheduled announcements 8 times a year, but can make unscheduled announcements at any time in response to a major or unexpected economic shock. When the policy rate changes, lenders typically adjust their prime lending rates within a day of the announcement.
As of early September 2026, that transmission remains the main upward risk to Canadian fixed rates. The US Federal Reserve held its benchmark rate at 3.50% to 3.75% again on July 29, its fifth consecutive hold, with three of twelve voting members dissenting in favour of a hike over persistent inflation. US inflation has since cooled, with headline CPI easing to 3.4% year over year in July and core to 2.5%, but both remain above the Fed’s 2% target, and US Treasury yields have stayed elevated. The August payroll report came in far stronger than forecast, at 162,000 jobs, with the jobless rate holding at 4.1%, and futures moved to price in better-than-even odds of a Federal Reserve rate increase in September. Since Canadian bond yields tend to track US yields, that pressure pushed the 5-year Government of Canada (GoC) bond yield to a 12-month high near 3.36% on August 21, prompting lenders to raise fixed rates twice in five days. The yield eased back to 3.26% by August 26 and has since returned to around 3.35%, and lenders have held their higher pricing throughout.
Two forces are pulling Canadian fixed rates in opposite directions, which is why they have drifted rather than jumped. Pulling up, hawkish commentary from Federal Reserve officials has kept United States Treasury yields elevated, and Canadian yields tend to follow. Speaking from the Jackson Hole symposium on August 27, Cleveland Federal Reserve President Beth Hammack, one of the 3 dissenters who favoured a hike at the Fed’s July meeting, said she believes now is the time to act on raising rates, a view she maintained after the July CPI release showed inflation cooling. Government borrowing is now part of that upward pressure as well, since heavier bond issuance across most major economies, and growing competition for investor capital from corporations funding data centres and other artificial intelligence infrastructure, leave less appetite to absorb new supply at lower yields. Pulling down, foreign investors bought a record $80.8 billion of Canadian government bonds in the second quarter, and Canada posted its largest current account surplus since 2005. Strong demand for Canadian government debt supports bond prices and holds yields down. The net result of that tug of war has been a fixed rate environment that moves in small steps rather than large ones, though the steps have all pointed the same way since the spring.
Top Economists’ Mortgage Predictions for 2026
The Bank of Canada’s (BoC) latest Market Participant Survey, which gathers and publishes the views of senior economists and strategists in the Canadian financial market, indicates that rate cuts may have ended and will remain unchanged for the remainder of the year.
Results from the most recent Q2 2026 survey, released July 27, 2026, suggest rate cuts have ended. Rates are predicted to remain at 2.25% for 2026, with the first increase widely expected only in the second quarter of 2027. The same survey now points to a further increase, to 2.75%, as early as the third quarter of 2027, one quarter sooner than the previous survey indicated. This 2.25% rate falls within the lower end of the neutral rate range, where interest rates neither stimulate nor restrict the economy. The Bank’s next Market Participants Survey is expected in the fourth quarter of 2026, following the October rate announcement.
Policy Interest Rate Forecast
| 2026 | Policy Interest Rate (median response) |
|---|---|
| July | 2.25% |
| September | 2.25% |
| October | 2.25% |
| December | 2.25% |
5-Year Canadian Bond Yield Forecast
| 2026 | 5-Year Canadian Bond Yield (median response) |
|---|---|
| December | 3.15% |
nesto’s Policy Interest Rate Forecast for Canada 2026
| Policy Rate | |
|---|---|
| Q2 | 2.25% |
| Q3 | 2.25% |
| Q4 | 2.25% |
October 2026 Canada Mortgage Rates Forecast
On September 2, the Bank of Canada held its target for the overnight rate at 2.25% for its seventh consecutive decision, leaving the prime rate unchanged at 4.45%. The recovery has broadened since the spring: second-quarter growth came in at an annualised 3.3%, ahead of the Bank’s own 2.5% projection, with gains across consumption, housing, exports and business investment, and unemployment edged down to 6.4% in July, below the 6.5% to 7% range it had occupied since late 2024. Labour demand is still subdued, and the economy is running with excess supply. Inflation has been hovering around 3% year-over-year, held there by gasoline as the blockade of the Strait of Hormuz drags on; excluding gasoline, inflation was 2.2%, and core measures stayed near 2%. Financial conditions have tightened as well, with long-term bond yields moving up globally and in Canada. The Bank still expects inflation to average about 2.5% in the second half of 2026 and return to the 2% target by early 2027. Governor Tiff Macklem was direct about where the balance now sits:
Unlike in July, when the Bank read the risks as broadly balanced, this decision was framed around two risks pulling in opposite directions: persistently high oil prices and spillover into other goods and services, while new US tariffs and Canadian countermeasures make growth prospects less certain. The Governing Council offered no forward guidance beyond a readiness to move if conditions change. Bond markets price a high probability of no change on October 28, with a 27% probability of a 25-basis-point hike. By December 9, markets imply a 98% chance of a hike. Read the full Opening Statement and our post-announcement mortgage strategy breakdown for what this means for Canada’s mortgage rates forecast.
Bank of Canada Interest Rate Expectations for 2026
On July 15, the Bank of Canada held the policy rate at 2.25% for a sixth consecutive time, exactly as every one of the 36 economists in a July Reuters poll had expected. The decision came alongside the Bank’s quarterly Monetary Policy Report, which showed a more constructive read of the economy than the April report. Statistics Canada has since confirmed that view and then some: second-quarter GDP grew at an annualised 3.3%, well ahead of the roughly 2.5% the Bank itself had projected for the quarter, and the first quarter was revised up to an annualised 0.3% from the flat reading first published. The Bank still held its full-year 2026 growth projection at 0.7%, rising to 1.8% in both 2027 and 2028, and has not revised that projection since. With the August Labour Force Survey showing employment down 42,000 and the unemployment rate holding at 6.4%, and the Bank’s core inflation measures near the 2% target, the Bank is widely expected to keep the policy rate on hold for much of the rest of 2026.
A second Reuters poll, taken in late August after trade talks collapsed and United States tariffs took effect, found all 35 economists surveyed expecting a hold on September 2 and no change for the rest of 2026. The Bank delivered that hold, its seventh consecutive, while shifting its risk language: upside risks to inflation have increased, and new tariffs have made growth prospects less certain. The same poll put the first increase in the fourth quarter of 2027, with 47% of respondents expecting at least one increase by the end of the second quarter of 2027. Not one forecast a cut. Economists surveyed generally read the trade escalation as a drag on growth rather than a new source of inflation, which is why it reinforces a hold rather than pointing the Bank in either direction. For borrowers, a seventh consecutive hold means variable mortgage rates stay where they are, and fixed mortgage rates continue to follow bond markets rather than the Bank of Canada.
As a result, any rate adjustments in 2026 are expected to be gradual and measured, aimed at fine-tuning rather than delivering broad-based relief or tightening. For mortgage borrowers, this indicates that while borrowing costs may edge lower for some over time, they are unlikely to return to pre-pandemic lows.
The Bank of Canada also pushed back on recession fears throughout the spring, describing the economy as weak and in excess supply but not in recession; the upward revision to the first quarter has since settled the question by confirming there was never a second consecutive quarterly decline, which a technical recession requires. Among the big banks, RBC expects no policy rate moves in 2026, with the Bank beginning to raise rates in 2027.
Bank of Canada 2026 Rate Announcement Schedule
| Date | BoC Rate Decision (%) | Target Rate |
|---|---|---|
| January 28 | No Change | 2.25% |
| March 18 | No Change | 2.25% |
| April 29 | No Change | 2.25% |
| June 10 | No Change | 2.25% |
| July 15 | No Change | 2.25% |
| September 2 | No Change | 2.25% |
| October 28 | TBD | TBD |
| December 9 | TBD | TBD |
Bank of Canada 2025 Rate Announcement Schedule
| Date | BoC Rate Decision (%) | Target Rate |
|---|---|---|
| January 29 | -0.25 | 3.00% |
| March 12 | -0.25 | 2.75% |
| April 16 | No Change | 2.75% |
| June 4 | No Change | 2.75% |
| July 30 | No Change | 2.75% |
| September 17 | -0.25 | 2.50% |
| October 29 | -0.25 | 2.25% |
| December 10 | No Change | 2.25% |
What Affects the Bank of Canada’s Future Rate Decisions?
Inflation
Inflation accelerated to 3.0% year-over-year in July, up from 2.8% in June. Gasoline drove the move, rising 25.7% from a year earlier compared with 20.5% in June, as the blockade of the Strait of Hormuz and the partial closure of Red Sea shipping routes in late July lifted global fuel costs. Excluding gasoline, the CPI held at 2.2% for a third consecutive month. Travel prices added to the acceleration, with travel tours up 15.2% and air transportation up 12.0%, both boosted by World Cup demand and costlier jet fuel. The Bank of Canada’s preferred core measures barely moved: CPI-trim held at 1.9%, and CPI-median edged up to 2.0%, leaving their average at 2.0%. Shelter inflation eased again to 1.3%, the slowest pace since May 2020.
For rate watchers, the composition of the July print matters more than the headline. The pickup is driven by energy and travel rather than broad-based domestic price pressures, which is why the Bank of Canada held the policy rate on September 2 and is expected to keep it there through the rest of 2026. The headline rate now sits above the path in the Bank’s July Monetary Policy Report, although that Report already expected CPI inflation to stay elevated before easing gradually back to around 2% in early 2027. In its September statement, the Bank noted that upside risks to that forecast have increased while oil prices and refinery margins stay high. August inflation is released on September 14, and it is the release most likely to decide whether the December meeting stays on hold. Slower wage growth in the August jobs report reduces the risk that high pump prices turn into broader inflation, since wages are the main channel through which an energy shock becomes persistent.
Inflation is the most important driver of the BoC’s rate decisions. To achieve its 2% inflation target, the BoC must adjust its policy interest rates to control inflation.
When inflation rises above this target, the Bank of Canada (BoC) increases the policy rate. In turn, commercial banks and lenders raise their prime rates, which directly affect loan and mortgage rates. This discourages borrowing and spending, supporting the BoC’s efforts to return inflation to its 2% target.
If inflation falls below the 2% target, the BoC might lower the policy interest rate to stimulate the economy. Lenders, in turn, decrease their prime rates to encourage borrowing and spending.
Consumer Price Index (CPI) Release Dates 2026
| Date | CPI (Year-over-Year Change) |
|---|---|
| January 19 | +2.4% |
| February 26 | +2.3% |
| March 16 | +1.8% |
| April 20 | +2.4% |
| May 19 | +2.8% |
| June 22 | +3.2% |
| July 20 | +2.8% |
| August 17 | +3.0% |
| September 14 | TBD |
| October 19 | TBD |
| November 16 | TBD |
| December 14 | TBD |
Employment
Canada shed 42,000 jobs in August 2026, against forecasts for a gain of about 15,000, while the unemployment rate held at 6.4%, according to Statistics Canada’s Labour Force Survey released September 4. The employment rate fell 0.1 percentage points to 60.8%. The decline interrupted a strong run: employment had risen 181,000 between April and July, and the jobless rate had fallen half a percentage point over the 3 months to July. As the first labour reading published after the Bank of Canada’s September 2 decision, this report starts the case the Bank will weigh on October 28. September employment data is released on October 9.
The unemployment rate held steady only because the labour force shrank alongside employment. The participation rate slipped 0.1 percentage points to 65.0%, and about 1.5 million people were unemployed in August, of whom 24% had been looking for work for 27 weeks or longer. The losses landed in full-time work, down 36,000, against a smaller decline of 5,800 in part-time work. That split matters for mortgage qualification, because full-time employment income is what lenders can use in full when calculating how much you can borrow.
By industry, employment fell in business, building and other support services (-20,000), public administration (-8,800), natural resources (-7,700) and utilities (-5,600). Manufacturing was the only industry to post a significant increase, adding 22,000 jobs, most of them in Ontario, despite being the sector most exposed to United States tariffs. Public sector employment fell 20,000, a third consecutive monthly decline.
Employment among youth aged 15 to 24 fell 19,000, and the youth unemployment rate rose 0.3 percentage points to 12.9%, interrupting a 1.7 percentage point decline between April and July. The unemployment rate rose to 6.0% for core-aged men and fell to 5.0% for core-aged women. Students returning to school still had a better summer than a year earlier, with an unemployment rate of 9.2% among returning students aged 20 to 24, down from 12.3% in the summer of 2025.
Regionally, the losses were concentrated in the 2 largest provinces. Employment fell by 19,000 in Quebec, where the unemployment rate held at 5.6%, and by 18,000 in Ontario, where it edged up to 6.9%. British Columbia’s unemployment rate rose 0.3 percentage points to 6.5%. New Brunswick added 2,400 jobs, and employment was little changed in the other provinces.
Average hourly wages among employees rose 2.0% from a year earlier to $37.02, down from 2.8% growth in July (not seasonally adjusted). BMO described it as the slowest reading since 2017, outside the pandemic. Unlike the headline job loss, this is a trend rather than a single print, and it matters for rates: slower wage growth is what keeps an energy price shock from turning into persistent inflation, which is the risk the Bank flagged in September.
Not every line in the report pointed the same way. Total hours worked rose 0.6% in August, building on a similar gain in July and leaving the third quarter tracking an annualised increase of about 5%. Scotiabank read that as employers extending the hours of existing staff rather than hiring, an outcome it described as more hawkish than dovish. Statistics Canada also noted that the layoff rate in industries dependent on United States export demand averaged 0.9% over the 12 months to August, compared with 0.7% in other industries—a channel to watch as the August tariffs work through.
Economists were cautious rather than alarmed. Desjardins noted that a later-than-usual Labour Day and school start may have pushed some end-of-summer hiring into September. TD’s read was that one soft month should not define the labour market, while RBC continues to point to accelerating retirement and slower population growth as the larger drags on employment this year, which is why it treats the unemployment rate as the better gauge of cyclical conditions. Manulife Investment Management read the report as evidence that any signal of imminent rate increases was premature. For borrowers, the practical effect was small: softer hiring and cooler wages weaken the case for a hike, but Canadian bond yields barely moved on the release, so fixed mortgage pricing stayed where it was.
BoC rate decisions aim to support maximum sustainable employment levels, maintain output growth, keep inflation predictable and stable, and stimulate the economy. For the economy to maintain inflation at the 2% target, it needs to maintain its maximum sustainable level of employment. This means the economy operates at its highest productive capacity and can sustain itself without triggering inflation.
When employment falls below the maximum sustainable level, people cannot find work and their earnings and savings decline. This affects spending habits, pushing inflation lower, possibly below the 2% target. When employment exceeds this level, employers struggle to find enough workers to meet demand, driving prices and wages higher and increasing inflation. Finding the right balance between inflation and the employment rate is challenging, as both are measured using data from the previous month rather than in real time.
Economic Growth (GDP)
Economic growth tells the Bank of Canada how much spare capacity the economy has. When output grows faster than the economy’s productive potential, spare capacity closes and inflationary pressure builds, which argues for a higher policy rate. When growth stalls, excess supply widens, and inflation pressure eases, which argues for a lower one.
Real GDP grew 0.8% in the second quarter of 2026, an annualised 3.3%, the fastest quarterly pace in more than 3 years. Exports rose 3.6%, led by a 27.0% jump in passenger car and light truck shipments as auto production recovered from the semiconductor shortage and retooling shutdowns that disrupted the previous 2 quarters. Business capital investment rose, ending five consecutive quarterly declines, with engineering structures up 2.3% and spending on computers and peripherals up 16.7%. Residential investment rose 2.5%. Measured by industry, output rose 0.9%, with 17 of 20 sectors expanding.
Composition matters more than the headline. Imports rose only 0.3%, so net trade alone contributed roughly 4.4 percentage points to annualised growth, a one-time catch-up that will not repeat. The reference period also ended in June, and Statistics Canada’s advance estimate shows July output essentially unchanged. That combination is why a quarter strong enough to argue for tighter policy did not shift the September 2 decision. The Bank itself described the pick-up as broad-based while noting that some of the strength reflected temporary factors.
Growth reaches mortgage rates through 2 channels rather than one. Stronger growth reduces the Bank of Canada’s urgency to cut the policy rate, which sets prime and therefore variable mortgage rates. Separately, bond markets reprice Government of Canada yields on the data itself, months before the Bank would act, and those yields set fixed mortgage rates. For a fuller breakdown of the release and what it means for borrowing costs, read our guide to Canada’s GDP numbers.
Gross Domestic Product (GDP) Release Dates 2026
| Date | Reference Period | Real GDP Result |
|---|---|---|
| May 29 | First quarter 2026 | Reported unchanged, later revised to +0.1% (+0.3% annualised) |
| June 30 | April 2026 | +0.5%, later revised to +0.6% |
| July 31 | May 2026 | +0.3% |
| August 28 | June 2026 and second quarter | +0.3% monthly; +0.8% quarterly (+3.3% annualised) |
| September 29 | July 2026 | TBD |
| November 30 | Third quarter 2026 | TBD |
The US Economy
The latest data from the US Bureau of Labor Statistics show that US headline CPI rose 3.4% year over year in July 2026, easing from its spring peak, while core CPI, excluding food and energy, slowed to 2.5%. Both measures remain above the Federal Reserve’s 2% target, with shelter the largest contributor in July. The US labour market then surprised sharply in the other direction: after payroll employment fell 23,000 in July, it rose 162,000 in August, roughly triple the consensus estimate and the strongest monthly gain since March, with prior months revised up by 55,000 and the unemployment rate holding at 4.1%. Futures markets responded by pricing in better-than-even odds of a Federal Reserve increase at its September meeting. The Federal Reserve held its benchmark rate at 3.50%-3.75% on July 29, its fifth consecutive hold, with three of twelve voting members dissenting in favour of a hike over persistent inflation. US Treasury yields have stayed elevated through the summer, and since Canadian bond yields tend to track them, this backdrop remains the main external influence on Canadian fixed mortgage rates. The 2 labour markets moving in opposite directions in the same week is the clearest recent illustration of why a weak Canadian jobs report does not automatically deliver lower fixed rates in Canada. The Bank of Canada’s July Monetary Policy Report put US growth at about 2.5%, driven mainly by strong consumption and booming AI-related investment. In its September statement, the Bank said US growth continues to be solid, while noting the Canadian dollar has appreciated slightly on US-dollar weakness. The next US CPI release is September 11, 2026.
Tariffs and How They Influence Interest Rates in Canada
Trade tensions and tariff announcements may seem far removed from mortgage rates, but they play a direct role in shaping borrowing costs. Since early 2025, the US has imposed significantly higher tariffs on Canadian goods. Recent trade tensions between the US and Canada add complexity to inflation and monetary policy decisions. The Bank of Canada often responds by keeping policy rates higher for longer or delaying planned rate cuts to prevent consumer prices from climbing further.
The picture grew more uncertain over the summer. On July 1, the US declined to renew CUSMA (also known as USMCA) for a further 16-year term at its first joint review, leaving the agreement in force until 2036 but subject to annual reviews and a longer stretch of trade uncertainty for Canadian exporters. That annual-review timeline is separate from a faster-moving risk: under CUSMA’s Article 34.6, any party can withdraw from the agreement entirely on just six months’ written notice, a materially shorter path to disruption than the 2036 sunset date. No party has invoked it, but its existence is one reason trade uncertainty is expected to persist well beyond the 2026 review. Around the same time, renewed US-Iran tensions sent oil prices swinging, with benchmark crude jumping about 7% in the week of July 8 after a period of relative calm. Those tensions escalated further in late July, when the Strait of Hormuz was blockaded, and Red Sea shipping routes were partly closed, keeping energy costs elevated into August. The Bank of Canada’s July 15 Monetary Policy Report noted that, despite the now-annual CUSMA reviews, more Canadian businesses report finding ways to navigate the uncertainty, and that government spending is also contributing to higher economic activity than projected.
Trade conditions then deteriorated sharply in late August. Negotiations with the United States broke down on August 22, and a 50% United States tariff took effect the same day on roughly $28 billion of Canadian goods under Section 338 of the Tariff Act of 1930. Canada’s countermeasures on about $27.6 billion of American products took effect on September 8, alongside support measures for affected businesses, after seafood and fish products were removed from that list on August 26.
The measured exposure is narrower than the headline rate suggests. The affected goods represent roughly 5% of Canadian exports to the United States, a figure the Bank of Canada repeated in its September opening statement, and more than 80% of Canadian exports still enter the country duty-free under CUSMA. The concentration is regional and sectoral rather than national, falling hardest on producers of plastics, electrical machinery, furniture and wood products in Quebec, British Columbia and Ontario. For rates, most economists read the escalation as a drag on growth rather than a new source of inflation, which is why it reinforces a hold rather than pushing the Bank of Canada in either direction. The Bank did note, however, that the new tariffs and Canadian countermeasures will raise costs for some businesses and could feed into consumer prices over time. Because both sets of measures landed after the August survey period, the first labour and inflation data to fully capture them arrive in October.
Here’s why tariffs matter for Canadian mortgage rates:
- These tariffs increase the costs of imported materials and intermediate goods (for example, metals, automotive parts, and machinery) used in Canadian production. Higher costs translate into stronger inflationary pressures, which in turn can make the Bank of Canada (BoC) more reluctant to cut its policy rate.
- Tariffs on Canadian exports to the US, such as steel, lumber, or manufactured goods, raise costs and slow demand for Canadian producers. This slowing demand for Canadian products can lead to weaker business investment, lower exports, and a hit to Canada’s overall economic growth, moderating the impact of retaliatory import tariffs on inflation.
- Uncertainty around trade and tariff threats can also increase the risk premium investors demand on Canadian-dollar assets. This tends to widen the gap between global interest rates, US yields, and Canadian yields, resulting in higher long-term mortgage rates in Canada.
- If trade talks progress and tariffs are eased, inflationary pressures may ease, and the BoC may gain more flexibility to reduce borrowing costs.
Impact on Canadian Mortgages
Tariff-related price pressures can ripple through the economy, affecting all types of borrowers. When tariffs increase the cost of imported goods and materials, they often feed into broader inflation, which could prompt the BoC to keep borrowing costs elevated for longer.
For first-time homebuyers, higher inflation can make it harder to qualify for a mortgage, increase the total cost of borrowing and push monthly payments higher. Lenders may tighten qualification ratios, further limiting how much buyers can borrow.
For renewers, elevated interest rates mean limited opportunities for meaningful rate relief at renewal. Many borrowers coming off historically low rates may see noticeable increases in monthly payments as fixed and variable rates remain elevated.
For refinancers, higher borrowing costs can reduce or eliminate the benefit of consolidating high-interest debt or tapping into home equity. Until inflation pressures linked to tariffs ease, homeowners may find fewer favourable options when restructuring their mortgage.
What Canada’s Mortgage Rate Forecast Means for Borrowers
Higher borrowing costs have already weighed on consumer demand, and mortgage rates are expected to remain relatively stable throughout 2026, with the risk on fixed pricing tilted upward rather than down. Bond yields may still experience periodic upticks, especially if economic data remains better than expected. This could slow the pace at which lenders adjust fixed mortgage rates.
Mortgage renewals will remain a significant source of pressure in 2026. A large share of borrowers will be renewing mortgages taken out when the Bank of Canada policy rate was at or below 1%. For these households, renewal rates will be materially higher than they have been, increasing the risk of a mortgage payment shock.
This adjustment is expected to place ongoing strain on household budgets and could continue to dampen housing demand, particularly among fixed-rate borrowers facing sharp payment resets. However, rising costs could also tame the inflation outlook as shelter and mortgage interest costs feed into Canada’s CPI.
Fresh data shows how this is playing out for Canadian mortgage holders and borrowers. The Bank of Canada’s Financial Stability Report estimates that a minority of borrowers, roughly 4% nationally and closer to 9% in the Toronto area, may not qualify to refinance at 2027 rates and prices. However, most can still renew with their existing lender. Being unable to refinance is not the same as defaulting; it will just leave households carrying on without a solution to their tight credit obligations. Household debt relative to disposable income also remained elevated at 179.6% in the first quarter, marking its sixth consecutive quarterly increase, leaving less room to absorb higher payments. Second-quarter figures for household net worth and the debt service ratio are released on September 11. Canada Mortgage and Housing Corporation’s consumer research points in the same direction, with 35% of borrowers who renewed reporting increased financial pressure due to changes in interest rates.
Mortgage Rate Predictions 2027 to 2030
While it’s nearly impossible to predict the exact path of interest rates, most economists broadly agree that interest rates are likely to stabilise as inflation remains under control and within the target range. Higher borrowing costs will touch more households, particularly as borrowers who locked in historically low rates continue to renew at much higher rates. This renewal wave is expected to weigh on household budgets and temper housing demand and inflation, as shelter and mortgage interest costs feed into the consumer price index (CPI).
Looking beyond 2026, the outlook is shaped by slower rate cuts and a gradual normalization of rates, with modest adjustments reflecting economic conditions rather than the emergency policy measures to which we have become accustomed. This sets the stage for a multi-year environment in which mortgage rates remain closer to historical norms, making long-term planning more essential than short-term rate-timing. Consensus forecasts see the Bank holding the policy rate at 2.25% through 2026 before beginning to raise it in the second quarter of 2027, with RBC, for example, projecting a series of quarter-point increases through 2027. Market pricing runs ahead of that timeline, which is worth keeping in mind if you are choosing between a shorter and a longer term.
Canada Policy Interest Rate Forecast 2027
| Bank | Q1 2027 | Q2 2027 | Q3 2027 | Q4 2027 |
|---|---|---|---|---|
| BMO | 2.25% | 2.25% | 2.25% | 2.25% |
| CIBC | 2.25% | 2.50% | 2.75% | 2.75% |
| National Bank | 2.50% | – | – | 2.75% |
| RBC | 2.50% | 2.75% | 3.00% | 3.25% |
| Scotiabank | 3.00% | 3.00% | 3.00% | 3.00% |
| TD | 2.25% | 2.25% | 2.25% | 2.25% |
Government of Canada 5-Year Bond Yield Forecast 2027
| Bank | Q1 2027 | Q2 2027 | Q3 2027 | Q4 2027 |
|---|---|---|---|---|
| BMO | 2.90% | 2.95% | 2.95% | 2.95% |
| CIBC | 3.30% | 3.35% | 3.40% | 3.45% |
| National Bank | 3.10% | – | – | 3.05% |
| RBC | 3.40% | 3.45% | 3.50% | 3.50% |
| Scotiabank | 3.35% | 3.35% | 3.35% | 3.35% |
| TD | 2.90% | 2.90% | 2.90% | 2.90% |
Bank of Canada Market Participants Survey Quarterly Forecast 2027 to 2028
The Bank of Canada’s Q2 2026 survey extends to 2027 and 2028, providing an outlook for future interest rates.
| 2027 | Policy Interest Rate (median response) |
|---|---|
| January | 2.25% |
| March | 2.50% |
| April | 2.50% |
| June | 2.50% |
| Q3 | 2.75% |
| Q4 | 2.75% |
| 2028 | |
| Q1 | 2.75% |
| Q2 | 2.75% |
| Q3 | 2.75% |
| 2027 | 5-Year Canadian Bond Yield (median response) |
|---|---|
| December | 3.10% |
nesto’s Policy Interest Rate Forecast for Canada 2027 to 2030
| Policy Rate | |
|---|---|
| Q1 2027 | 2.50% |
| Q2 2027 | 2.50% |
| Q3 2027 | 2.50% |
| Q4 2027 | 2.50% |
| Q1 2028 | 2.75% |
| Q2 2028 | 2.75% |
| Q3 2028 | 2.75% |
| Q4 2028 | 2.75% |
| Q1 2029 | 3.00% |
| Q2 2029 | 3.00% |
| Q3 2029 | 3.00% |
| Q4 2029 | 3.25% |
| Q1 2030 | 3.25% |
| Q2 2030 | 3.25% |
| Q3 2030 | 3.25% |
| Q4 2030 | 3.50% |
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Frequently Asked Questions (FAQ) About Mortgage Rate Forecasts in Canada
Will mortgage interest rates go down in 2026?
The Bank of Canada held its policy rate at 2.25% on September 2, 2026, for a seventh consecutive time, and mortgage rates are expected to remain stable for the rest of the year rather than decline. Market pricing now points to the Bank’s next move being an increase rather than a cut.
How much will interest rates rise in the next 5 years?
Most forecasts indicate that interest rates will remain within a more normalised range rather than increase or decrease significantly. However, it is difficult to predict how rates will change over the next five years, as domestic and foreign inflationary pressures influence the BoC’s decisions to raise or lower rates. One of the most significant factors in the long-term inflation battle is the cost of living, which will continue to rise as our population grows and ages.
How will my mortgage payment be affected if it comes up for renewal in 2026?
For most borrowers renewing in 2026, mortgage payments are likely to be higher than they were at origination. Borrowers who locked in fixed rates in 2021 should expect noticeable increases in their payments. Those with fixed rates could see an increase of approximately 20%. In comparison, those with variable rates could see increases ranging from 7% to 40%, depending on whether they took an adjustable-rate mortgage (ARM) or a variable-rate mortgage (VRM).
When is the best time to get a mortgage?
The best time to get a mortgage is when your finances are stable, your credit is strong, and you have saved enough for a down payment and closing costs. Mortgage rates can change quickly and are difficult to predict accurately, so timing the market is rarely a reliable strategy.
Should I wait for rates to drop before buying?
Waiting for mortgage rates to drop can be risky because forecasts can change, and lower rates are not guaranteed. Lower rates can also increase buyer demand and push home prices higher. If you buy when you are financially ready, and mortgage rates decline, you may be able to switch from a variable rate to a fixed rate, choose a shorter-term fixed rate, blend your mortgage, or refinance to take advantage of lower borrowing costs.
Did Canada’s August jobs report change the mortgage rate forecast?
Canada’s August jobs report did not change the mortgage rate forecast. Employment fell 42,000 and wage growth slowed to 2.0%, which weakens the case for a Bank of Canada increase, but the unemployment rate held at 6.4% and Canadian bond yields barely moved on the release, so fixed mortgage pricing was left broadly where it was.
Will the Bank of Canada raise its policy rate in December 2026?
Most economists do not expect the Bank of Canada to raise its policy rate at the December 9 decision, although money markets are pricing in a partial increase for that meeting. The gap between market pricing and economists’ forecasts is unusually wide right now, and the August inflation report, released September 14, is the next likely to narrow it.
How did Canada’s second-quarter GDP affect the mortgage rate forecast?
Canada’s second-quarter GDP growth of 3.3% annualised did not change the mortgage rate forecast for 2026. The strength came largely from a one-time rebound in auto exports during a period that ended in June, and Statistics Canada’s advance estimate shows July output flat, which is why the Bank of Canada held the policy rate on September 2.
What did the Bank of Canada do on September 2, 2026?
The Bank of Canada held its policy rate at 2.25% on September 2, 2026, for a seventh consecutive decision, as all 35 economists in a late-August Reuters poll had forecast. It also said upside risks to inflation have increased while new tariffs make growth prospects more uncertain, and gave no guidance on its next move.
Will mortgage rates rise if the Canadian economy continues to grow?
Mortgage rates will not necessarily rise if the Canadian economy continues to grow. Fixed rates respond to Government of Canada bond yields, which price expectations rather than past results, and variable rates respond only when the Bank of Canada changes its policy rate. Sustained growth that closes excess supply would eventually argue for higher rates, but a single strong quarter does not.
Final Thoughts
Mortgage rates will fluctuate, as they have since the invention of mortgages. Ultimately, it’s not the rate that matters, but how much of your disposable income goes toward servicing this obligation. Your goal should be to keep your mortgage payments predictable, manageable within your budget, and feasible over the long term, aligning with your unique needs and long-term financial plans. In the market, rates are expected to stabilise and are unlikely to return to historic lows; flexibility, predictability, and long-term planning matter more than short-term timing of rates.
Mortgage decisions in today’s rate environment require more than guesswork. Reach out to nesto mortgage experts for transparent advice to help you navigate your rate options and long-term mortgage planning.
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