Mortgage Rate Forecast Canada 2026 – 2031

The decisions Canadians make on their mortgage in 2026 largely depend on the mortgage rate forecast. It’s a decision that will affect homeowners for several years to come and could save thousands of dollars in mortgage interest.

Use this page to stay up to date with the latest mortgage rate forecast and Bank of Canada interest rate probabilities. You’ll see how to position yourself for the best possible mortgage rate – and turn it into real savings over the next five years.

This page is updated weekly by Brent Richardson, Mortgage Broker, Certified Financial Planner (CFP) and Founder of Altrua Financial. Its insight based on in depth economic research and over 17 years of real world experience, having personally closed over 1900 mortgages.

Last updated: January 12, 2026

In this article we’ll review:

• Current financial market interest rate probabilities and Big Bank mortgage rate forecasts in Canada.
• How Canadian and global economies and trends is affecting mortgage rate predictions.
• How to position yourself for long term interest rate savings with the best mortgage option.

BoC Interest Rate Forecast (January 28 Meeting)

Key takeaways from this chart:

• The Bank of Canada is likely to hold at its next meeting.

• Commercial bank prime will remain at 4.45%, with variable mortgage rate pricing based on this (ex. ‘prime – 1%’).

• Major economic releases for December 2025 employment and CPI/inflation will likely alter these BoC odds slightly, but not enough to change projections for a hold in January.

Click here for the full BoC meeting schedule.

BoC Forecast for 2026: Financial Market Odds

Key takeaways from this chart:

• BoC rates are likely to hold for the majority of 2026.

• However, the end of 2026 (Dec BoC meeting) is marked with a higher probability for a rate hike (although its far from a certainty).

• A 0.25% hike in December 2026 is possible. But critically, financial markets are projecting a reasonably good outcome with US trade negotiations. If CUSMA renegotiations this Spring/ Summer don’t go well, we will likely see chances of this hike drop to 0%, and chances of a cut increase.

• We believe that currently, financial markets may be overly optimistic on their projections for trade outcome with the US. Given this, there is reasonable likelihood we will see odds of of this December hike drop.

BoC Forecast: Big Bank Predictions

Key takeaways from this chart:

• Big Bank economist consensus generally agrees with market probabilities/odds, mostly predicting the BoC will hold through 2026 (not hike).

• The outlier Bank from this view is Scotiabank, who predicts that the BoC will hike twice (by 0.50%) in late 2026.

• Soctiabank Economics (along with National Bank) believes that inflation is too high, and upward inflation pressures from trade protectionism persist. Since keeping inflation low is the Bank of Canadas main objective, Scotiabank believes this will result hikes later in 2026.

5 Year BoC Forecast (2026 – 2031)

Chart c/o mortgagelogic.news

Key takeaways from this chart:

• The BoC will increase rates 4 times, totalling 1%, over the next 5 years, according to current market data.

• This would increase Bank Prime by 1% and variable rates by the same over this period. The current base case is Bank Prime at 5.45% in 2031.

• Fixed mortgage rates would increase slowly over this period, resulting in high 4% to low 5% range rates by 2031.

• As noted just above, much can change over this longer period, especially with unpredictability of US trade relations, and potential for broader economic issues. When the Canadian economy suffers, this puts downward pressure on rates. Currently financial markets see inflation as a bigger threat (rates up) than economic weakness (rates down). But this can change quickly.

Fixed Mortgage Rate Forecast

The next series of charts focuses on fixed mortgage rate probabilities in 2026.

Fixed mortgage rates are based on, or ‘priced off of’, movements in Government of Canada Bond Yields. If Bond yields go up, so do fixed mortgage rates. Fixed mortgage rates drop if bond yields fall. More specifically, 5-year fixed mortgage rates are approximately 1% higher than the corresponding 5-year Government of Canada Bond Yields and generally fallow the Bond Yields movement.

Bond yields reflect like a ‘snapshot’, all known economic, political and other information at a given time, and are considered to be ‘leading economic indicators’ that predict well into the future. For example, over 2 years and 5 years as seen below. For this reason, Government Bond Yields are sometimes called ‘the Crystal Ball’ for mortgage rates (based on all known information at a given time). Bond Yields are a central part of ‘financial market odds’ as mentioned above, along with currency and other more complex financial insturments.

5 Year Fixed Mortgage Rate Pressure (Current)

Key takeaways from this chart:

• As of Jan 12, 2026, the 5-year government of Canada bond yield is 2.93%.

• This bond yield range is currently exerting stable, sideways pressure on fixed mortgage rates.

• Although some mortgage lenders have offered slight rate drops over the past week, fixed mortgage rates will not likely fall significantly unless 5 year bond yields reach the 2.85% range.

• If 5-year bond yields increase to the 3.10% range, we’ll likely see a small 0.05% – 0.10% fixed mortgage rate increase.

Current 2 Year Fixed Mortgage Rate Forecast

Key takeaways from this chart:

• The 2-year government of Canada bond yield is generally a good predictor of shorter-term 1-3-year fixed mortgage rates, and also of where the Bank of Canada overnight rate will be within 2 years. There is no upward or downward pressure on shorter term fixed rates – its a sideways market currently.

• Short-term bonds, such as the 2-year, are another forecasting tool for Bank of Canada interest rate movements.

• The current 2 year yield of 2.56% indicates upward pressure on the BoC overnight rate over the next 2 years. More specifically, according to this chart, we are likely to see a 0.25% increase in the BoC overnight rate from 2.25% to 2.5% within 2 years.

4 YR Rate Swap: 2.67%

A derivative of bond yields or a ‘synthetic financial instrument’; its predictive power over fixed mortgage rates is very accurate. Think of this data measure as a financial ‘betting market’ for where bond yields and fixed mortgage rates will be.  

The current 4 year swap is 2.67% and when used in combination with 5-year bond yields, indicates steady, sideways fixed mortgage rate pressure.

Current Information Driving This Rate Forecast

Below is the most important economic information that is factored into these interest rate forecasts.

Taken together, the information forms an economic forecast that the Bank of Canada is likely to base its interest rate decision on, and also that is currently priced into bond yields/ fixed mortgage rates. 

In other words, financial markets use this key economic information, primarily with pricing Bonds, to predict how the BoC will act months and years in the future.

The data are arranged from ‘highest level’ or broadest to most specific, generally reflecting the ‘flow’ of economic cause and effect, and how it’s ultimately distilled into Government of Canada bond yields and interest rate probability/odds. 

Global Trade Developments 

(Neutral Rate Pressure currently, but most likely to change) Canada has weathered US trade negotiations well so far compared to most other countries. Specifically, the CUSMA trade agreement has protected the vast majority of US-Canada trade from US tariffs.

However as CUSMA comes up for re negotiation starting in July 2026, there will likely be economic pressure on Canada to draw trade concessions in favour of the US. The extent to which these concessions are successful, or that Canada/US do not come to a trade agreement, will alter CUSMA accordingly.

We expect a bumpy and somewhat dramatic trade negotiation, and this in and of itself will likely impact the Canadian economy, However we also expect the end result heading into 2027 will not be catastrophic for Canada.

How Canada fares during and post negotiation will have an affect on fixed and variable mortgage rates, and we will continue to update on this key issue as it develops.

Federal Government Policy

(Upward Rate Pressure) Higher Government spending combined with large budget deficites have an upward pressure on inflation and bond yields/ fixed mortgage rates. More specifically, as Government spending flows through the economy, this adds upward pressure to prices of goods and therefore inflation. Also, as the Government issues more debt (Bonds is the main form of government debt), investors who buy these bonds are likely to demand a higher rate of return as risk increases, and investors demand higher incentive/compensation for this risk. Ultimately this is an upward long term pressure on fixed mortgage rates, regardless of decisions made by the Bank of Canada,

Economic Growth/ GDP:

(Neutral Rate Pressure) Real GDP contracted by 0.3% in October 2025. This results in flat Canadian real economic growth year to date, with early data for Nov and Dec 2025 ( remainder of Q4) also pointing towards economic flatness.

Employment:

(Neutral Pressure) Employment shows signs of stabilizing. In December Canada added 8,200 jobs. This shows moderation in the jobs market, on the heels of 55,000 new jobs in October. The unemployment rate increased to 6.8%, indicating more people entering the workforce, looking for work. Overall this is thought to have been a ‘sideways’ jobs report for December.

Inflation:

(Upward Rate Pressure) Core inflation remains stubbornly close to 3%, despite falling fuel prices. Grocery costs, auto insurance, and cell phone prices are the main culprits. Until core inflation dips below 2%, expect limited BoC easing. Stabilizing employment may not lead to lower inflation in the short term, as the BoC and economists had been expecting.

BoC Policy statements:

To summarize current BoC communication as of their most recent press release:

• They are satisfied with the level of the overnight interest rate.

• The BoC is factoring in sustained softness in economic growth and employment, with rates at current levels.

• An economic or trade crisis would cause the BoC to reevaluate the current 2.25% rate (and likely cut it further). However, this is currently a ‘wait and see’ situation.

Weekly Fireside Rate Chat with Brent Richardson (Article Author, Mortgage Broker)

Short Commentary on Video:

“Inflation still runs hotter than markets expected, and that’s the bigger risk than a US trade slowdown. Unless we see a major global shock or a sharp rise in unemployment, rates are unlikely to fall much further. This is especially supported by recent strength in jobs numbers. It’s a time to manage risk, not chase the absolute lowest rate.”

Explore Variable vs Fixed Mortgage Strategy →

How This Rate Forecast Applies to Your Mortgage

Let’s translate the mortgage rate forecast as seen above to how you can save on your mortgage, based on your situation.

Should You Take a Variable Mortgage Rate?

Variable rates have hit a near term bottom, based on current market data and Bank of Canada commentary that they are ‘satisfied with where rates are’. 

More specifically, the BoC is counting on further economic softness in Canada and on inflation dropping from here. So further declines in these areas will not impact near term BoC decisions.

With that said, data can change quickly, and if there is a crisis, such as a longer term breakdown in trade relations with the US or a banking crisis, this could send BoC rates spiralling down and variable mortgage rates along with them to stimulate employment and the economy.

This kind of economic crisis is speculative and not substantially priced into the market data/bond yields.

Given this, selecting a variable mortgage rate with the expectation of further Bank of Canada cuts would be a ‘bet’ that the market is currently wrong, and that the economy is likely to face significantly harsher economic weakness.

This line of reasoning carries a higher level of risk. Its possible that this economic weakness happens, but less likely. So while the odds are lower for variable rate declines, you could also see more reward if it does happen.

For this reason, the variable rate is recommended only to those who have a higher risk tolerance and a stable household balance sheet.

Should You Take a Fixed Mortgage Rate?

Fixed mortgage rates have levelled off for now and are likely at their short- to medium-term bottom—again, barring some sort of significant economic disruption.

Inflation is currently a greater threat to pushing up interest rates than a trade or banking crisis is to bringing them down. In fact, financial markets are calling for rate increases in 2027 through 2029.

Based on this data and perspective, it may be prudent to consider a 5-year fixed rate term in the high 3% or low 4% range. 

For thouse with a lower to balanced risk tolerance a 5 year fixed is likely the best decision based on these mortgage rate predictions.

For those with a balanced to higher tolerance for risk, a 3 year fixed is may be the best decision because the 3 year rate allows for more flexibility to break during the term and switch into a lower rate if rates drop (or on the renewal date in 3 years). However if rates are in fact higher in 3 years, this decision would result in higher interest costs and therefore is a riskier option than a 5 year fixed rate.

See Our Full Fixed Vs Variable Rate article HERE

Mortgage Renewals

Renewing your mortgage in 2026? Expect the most discounted fixed rate specials to be in the 3.79% – 4.1 % range, with variable rates in the 3.55 – 3.70% range.

Consider renewing early if you’re coming off a higher rate (ex. a 2-3 year fixed rate above 5%), and either has a relatively low 3 month interest breakage penalty, or NO penalty given close proximity to the renewal date. 

If a lender offers a rate under 4%; the net savings over 5 years can realistically be $1,000 – $3,000 on a $500,000 mortgage.

Consider a rate hold of up to 4 months. Although the current lender won’t likely hold the rate, approach a mortgage broker such as Altrua Financial to protect your rate against upside while leaving the opportunity to reduce it if rates drop. There is no financial cost, and only a benefit to this renewal rate strategy. 

➡ Compare Renewal Rates Here

Home Buyers

Affordability improves slightly as rates ease, but stress-test levels remain higher at 2% over the contract rate you’ve been quoted.

Given this, the variable rates in the 3.60% range will result in the highest pre approvals, with the stress test rate in the 5.6% range. However, not by much—likely just a few thousand in higher pre approval over a fixed rate in the 3.79%-3.99% range.

The most important factor in your home-buying mortgage rate is payment affordability relative to other goals. Here are some essential questions:

Will you have the flexibility to pursue other life interests and goals?

Do you plan on having your mortgage paid off before or by retirement?

Are you saving enough for retirement while also paying your mortgage?

Would an increase in the rate during the term affect these goals? Or is there sufficient cash flow in your household to withstand a payment increase?

Investors

For those with a higher risk tolerance, leveraged investing is attractive with a high 3/ low 4% borrowing cost.

Given forecasts of higher inflation, this may put upward pressure on equity and other asset markets.

At the same time, higher inflation is likely to push up rates in the medium- to long-term.

But for the time being, interest rates remain close to inflation—slightly higher, potentially a time to lock in for a longer period, such as 5 years—focusing on the delta of higher asset growth than a rate of ~4%.

On the other hand, a variable rate could act as a hedge against an economic crisis. If the economy were to plunge and take asset prices with it, at least your mortgage interest costs would fall too. Although this scenario isn’t priced into markets currently, it does not rule out consideration of this strategy.

How Interest Rates are Influencing Canada’s Housing Market

• Lower mortgage rates typically spark demand, but not in 2026 due to buyer hesitation from trade and general economic uncertainty.
• National prices are flat (+0.3 % y/y), while new listings have climbed 10% – 20%, improving buyer market conditions.
• Regional split: GTA and GVA remain soft, with slightly lower month-over-month values; the Prairies show resilience.

Expect continued housing softness into the winter of 2026. But when trade and economic prospects stabilize (even if at a slower growth rate) a steady recovery (not a boom), driven by attractive mortgage rates and better affordability, is likely to materialize. 

FAQ

Q: Will mortgage rates drop further in 2026?
A: Its possible, but likely only if core inflation falls below 2.5 % and unemployment rises significantly (ie 9%+ nationally). Expect a move towards stability, not sharp declines – or increases.

Q: Will we see 2% mortgage rates again?
A: Highly unlikely. Canada’s neutral rate is 2.25 – 3.25 %, drawing the 5-year fixed in the 4 – 5 % range longer term.

Q: How do tariffs and trade tensions impact rates?
A: Tariffs add short-medium term global inflation.The effect is a gradual but persistent upward pressure on interest rates.

Q: What is the best strategy for 2025 borrowers?
A: For most, a 5-year fixed near (ideally under) 4% balances stability and cost. This is a good conservative play. While confident borrowers can start with a variable and monitor lock-in points

About Brent Richardson, Article Author

Mortgage Broker | Founder Altrua Financial | Certified Financial Planner (CFP)

Brent has helped thousands of Canadians optimize their mortgage rate. With over 1,900 mortgages closed and nearly two decades of experience at the intersection of mortgages and financial planning, Brent combines real-world data and insights for clients seeking clarity in a changing market.

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