Mortgage Rates Forecast Canada 2026-2029

The Bank of Canada’s (BoC) most recent announcement, made on December 10th, 2025, was a rate hold, keeping the policy rate at 2.25%. The effects of rate changes can take 4 to 6 fiscal quarters (12 to 18 months) to be felt throughout the economy. 

Many Canadian borrowers are coming up for renewal for the first time since interest rates began to increase in 2022, and most are likely to see a significant increase in their mortgage payments.

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Key Takeaways

• The prime rate is currently 4.45%.
• Inflation in Canada is currently 2.2%. 
• Interest rates are forecasted to remain relatively stable in 2026.

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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. 

What Is the Mortgage Rate Forecast For Canada in 2026? (Updated January 2026)

The mortgage rate forecast for Canada indicates that rates are likely to remain stable at 2.25% for much of the year. By the end of 2026, most major banks predict that rates will end the year the same as they began. However, a couple of the big banks diverge from the rest and expect interest rates to rise, ending the year up 50 basis points to 2.75%.

Bank	Jan	Mar	Apr	Jun	Jul	Sep	Oct	Dec
BMO	2.25%	2.25%	2.25%	2.25%	2.25%	2.25%	2.25%	2.25%
CIBC	2.25%	2.25%	2.25%	2.25%	2.25%	2.25%	2.25%	2.25%
National Bank	2.25%	2.25%	2.25%	2.25%	2.25%	2.25%	2.75%	2.75%
RBC	2.25%	2.25%	2.25%	2.25%	2.25%	2.25%	2.25%	2.25%
Scotiabank	2.25%	2.25%	2.25%	2.25%	2.50%	2.50%	2.75%	2.75%
TD	2.25%	2.25%	2.25%	2.25%	2.25%	2.25%	2.25%	2.25%

Will There Be a Bank of Canada Rate Hike in 2026?

Most rate analysts predict that rates will stabilize 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.

Top Economist’s 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 Q3 2025 survey suggest we have seen the end of rate cuts. Rates are predicted to remain at 2.25% for 2026.

2026	Policy Interest Rate (expectations based on median response)
January	2.25%
March	2.25%
April	2.25%
June	2.25%
July	2.25%
September	2.25%
Q4	2.25%

Nesto’s Interest Rate Forecast for Canada 2026

	Policy Rate
Q1	2.25%
Q2	2.25%
Q3	2.25%
Q4	2.25%

January 2026 Canada Mortgage Rates Forecast 

On December 10, the Bank of Canada (BoC) left its overnight policy rate unchanged at 2.25% as the economy showed surprisingly strong momentum. The prime rate was left unchanged at 4.45%. Our mortgage rate forecast expects no further easing, with bond markets now assigning a higher probability of a rate hike by the end of 2026. Read the current Monetary Policy Decision Press Conference Opening Statement and our post-rate announcement insights.

Canada’s economy showed “surprisingly strong” momentum in the third quarter, with GDP up 2.6% even as final domestic demand was flat and trade volatility drove most of the gain. The labour market has “shown solid gains,” pushing unemployment down to 6.5%, although hiring intentions remain muted and trade-sensitive sectors are still adjusting. Inflation continues to evolve “largely as expected.” CPI slowed to 2.2% in October, and underlying inflation remains around 2.5%, with ongoing economic slack expected to keep price growth “close to the 2% target.”

“If inflation and economic activity evolve broadly in line with the October projection, Governing Council sees the current policy rate at about the right level to keep inflation close to 2% while helping the economy through this period of structural adjustment. If the outlook changes, we are prepared to respond,” stated Gov. Tiff Macklem. He emphasized that the Bank is focused on ensuring Canadians maintain “confidence in price stability through this period of global upheaval.” By holding the policy rate at 2.25%, the Bank signalled that policy is now set at “about the right level,” reinforcing that further easing is unlikely unless the outlook materially shifts.

Bond futures markets are now pricing another 97% probability of a rate hold and a minor 3% probability of a rate cut at the Bank of Canada’s policy rate announcement on January 28. By the March 18 policy interest rate announcement, the chance of a 25-basis-point (0.25%) cut will diminish to 8%.

Bank of Canada Interest Rate Expectations for 2026

Expectations for 2026 indicate that the Bank of Canada will remain cautious in its interest rate decisions. With inflation expected to remain around the 2% target and economic growth more resilient than forecast for 2025, the Bank is likely to keep policy rates consistent for much of 2026. 

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.

Bank of Canada 2026 Rate Announcement Schedule

Date	BoC Rate Announcement Decision (%)	Target Rate
January 28	TBD	TBD
March 18	TBD	TBD
April 29	TBD	TBD
June 10	TBD	TBD
July 15	TBD	TBD
September 2	TBD	TBD
October 28	TBD	TBD
December 9	TBD	TBD

Bank of Canada 2025 Rate Announcement Schedule

Date	BoC Rate Announcement 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 Future Bank of Canada Rate Decisions?

Inflation

The most recent inflation data show a 2.2% year-over-year rise in November, matching the 2.2% increase in October. This was due to prices for services rising at a slower rate year-over-year in November than in October. Offsetting slower growth in services were higher annual prices for goods, primarily driven by price increases for groceries and a smaller decline in gasoline prices.  

Inflation is the most important driving factor behind 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 loans and mortgages. 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 Index (Year-over-Year Change)
January 19	TBD
February 26	TBD
March 16	TBD
April 19	TBD
May 19	TBD
June 22	TBD
July 20	TBD
August 17	TBD
September 14	TBD
October 19	TBD
November 16	TBD
December 14	TBD

Employment

Statistics Canada’s Labour Force Survey data shows that employment increased by 0.3% (+54,000) in November. The employment rate, the proportion of people aged 15+ who are employed, rose 0.1% to 60.9%. The unemployment rate declined from 6.9% to 6.5%. Employment increased 1.1% in Alberta (+29,000), 1.4% in New Brunswick (+5,500), 0.6% in Manitoba (+4,500), and remained little changed in other provinces. 

19.6% of those unemployed in October found work in November. The job-finding rate was slightly higher than last year, indicating that job seekers were more likely to find work in November 2025 than in November 2024. In November 2025, 73.6% of employees felt secure in their jobs, down 4.1% compared to November 2023, the last time comparable data was collected.

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, which drives prices and wages higher and increases 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.

The US Economy

The latest data from the Bureau of Labor Statistics show that the U.S. CPI rose 0.3% in September following a 0.4% increase in August. The index for shelter rose 0.2%, while the all-items index increased to 3.0%.

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 the cost of borrowing. Since early 2025, the US has imposed significantly higher tariffs on Canadian goods. Recent trade tensions between the US and Canada add a layer of complexity for 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.

Here’s why tariffs matter for Canadian mortgage rates:

• These tariffs raise costs for imported materials and intermediate goods (such as metals, automotive parts, or 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 or U.S. 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 every type of borrower. When tariffs increase the cost of imported goods and materials, they often feed into broader inflation, which could see the BoC keep borrowing costs elevated for longer in response.

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.

Mortgage Rates Forecast for Buyers and Sellers in 2026

Higher borrowing costs have already weighed on consumer demand, and mortgage rates are expected to remain relatively stable throughout 2026. Bond yields may still experience periodic upticks, especially if economic data remains better than expected. This could limit the speed at which lenders adjust their 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 what they were used to, increasing the risk of 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.

Advice for Borrowers to Select and Save on Their Mortgage in 2026

In 2026, saving money on a mortgage is less about timing the lowest possible rate and more about choosing a structure that aligns with cash-flow stability, risk tolerance, and longer-term plans. Term length, rate type, and flexibility around prepayments will matter just as much as the headline rate, especially as interest rate relief is expected to arrive gradually rather than all at once.

1. Focus on Your Financial Stability
In 2026, interest rate uncertainty is expected to ease compared to prior years, but it has not disappeared. Mortgage decisions should be based on personal financial stability rather than short-term rate forecasts. Key considerations include income reliability, overall debt levels, and available savings.

Borrowers with steady income and sufficient cash reserves may be better positioned to tolerate an adjustable or variable mortgage, especially if gradual rate relief materializes over time. For those who prioritize predictability or have tighter budgets, a fixed-rate mortgage can provide assurance by locking in payments and reducing exposure to unexpected increases.

2. Match Your Term to Your Future Plans
Choosing the right mortgage in 2026 should reflect where life and finances are headed over the next few years, not just where rates might move. Borrowers anticipating major life changes such as relocating, growing their family, or accessing home equity may benefit from a shorter fixed term that provides stability today while preserving flexibility at renewal. 

Others who are comfortable managing some payment variability and have room in their budget may find value in variable mortgage options as borrowing costs gradually normalize. The goal is not to perfectly predict the market, but to select a term and structure that supports both financial resilience and future flexibility for your unique needs and financial circumstances.

Utilizing Fixed-Rate Mortgages to Reduce Interest Rate Risk

In today’s market, a fixed-rate mortgage strategy is more complex than simply locking in at the first sign of rate volatility. Inflation pressures have eased, but uncertainty around economic growth remains, and global risks have kept bond yields unpredictable. Since fixed mortgage rates are closely tied to Government of Canada bond yields of corresponding maturities, they tend to move in anticipation of inflation and interest rate trends rather than react after the fact. 

For borrowers prioritizing mortgage stability, fixed-rate mortgages continue to offer predictable payments and protect against short-term market swings. However, the current economic uncertainty has made term selection just as important as the rate itself. Shorter fixed terms have become an effective way to manage interest rate risk while preserving flexibility. This allows borrowers to secure certainty today without fully committing to a longer-term that could prove less attractive if borrowing costs gradually decline.

Utilizing Variable-Rate Mortgages to Reduce Interest Rate Risk

Variable-rate mortgages (VRM) and adjustable-rate mortgages (ARM) can be cost-effective options for borrowers who are comfortable with some payment variability. Since variable rates are tied to the Bank of Canada (BoC) policy rate, they move in step with changes in lenders’ prime rates. In a rate-cutting environment, ARMs can deliver savings more quickly because payments adjust immediately when rates change. 

For well-qualified borrowers, the ARM’s payment adjustment can translate into earlier relief with monthly cash flows. This flexibility has become increasingly valuable as households continue to manage tighter budgets. For those with stable income, sufficient savings, and the ability to absorb short-term fluctuations, an ARM can be an effective way to benefit from future rate reductions while maintaining overall financial stability.

Mortgage Rate Predictions 2027-2029

While it’s nearly impossible to predict the exact path of interest rates, most economists broadly agree that interest rates are likely to stabilize 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.

Canada Interest Rate Forecast 2027

Bank	Policy Rate Q1 2027	Policy Rate Q2 2027	Policy Rate Q3 2027	Policy Rate Q4 2027
BMO	–	–	–	–
CIBC	2.25%	2.50%	2.75%	2.75%
National Bank	–	–	–	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%

Bank of Canada Market Participants Survey Quarterly Forecast 2027

The Bank of Canada’s forecast extends to 2027, providing an outlook for future interest rates. 

2027	Policy Interest Rate (expectations based on median response)
Q1	2.25%
Q2	2.25%
Q3	2.50%
Q4	2.50%

Nesto’s Interest Rate Forecast for Canada 2027-2029

	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	3.00%

Frequently Asked Questions (FAQ) About Mortgage Rates Forecasts in Canada

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 stabilize and are unlikely to return to historic lows; flexibility, predictability, and long-term planning matter more than short-term rate timing.

Mortgage decisions in today’s rate environment require more than guesswork. Contact nesto mortgage experts for transparent advice to help you navigate your rate options and long-term mortgage planning.

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