2026 Mortgage Outlook in Canada: What Homeowners and Buyers Should Expect

The quick take

After a year of rate cuts through 2024–2025, the Bank of Canada (BoC) ended 2025 by holding the policy rate at 2.25%, signalling a period of stability heading into 2026. Variable-rate borrowers should see steadier payments, while fixed rates will continue to track bond yields. National home sales and prices are expected to rebound modestly in 2026.

Where the policy rate stands now

• The BoC’s target overnight rate is 2.25% (Dec 10, 2025) after a series of reductions through late‑2024 and 2025. That path included cuts to 4.25% (Sep 2024), 3.75% (Oct 2024), 3.25% (Dec 2024); and further trims to 3.00% (Jan 2025) and 2.75% (Mar 2025), before landing at 2.25% (Sep/Oct 2025) and holding in December.

• In December 2025, the Bank said the current rate is “about the right level,” noting inflation near the 2% target and a resilient economy despite trade uncertainty.

What this means: Lenders’ prime rate and, by extension, variable mortgage rates should remain stable unless new shocks emerge (e.g., trade developments under CUSMA review).

Housing market baseline for 2026

• CREA forecasts home sales rising ~7.7% to 509,479 in 2026, with the national average price up ~3.2% to ~$698,622, as demand gradually returns and affordability improves with lower borrowing costs.

• Analysts expect a measured recovery, not a boom: lower rates support demand, but high debt loads and uneven regional conditions will cap price growth.

Variable vs. fixed in 2026

• Given the BoC’s hold and guidance, variable‑rate payments are unlikely to whipsaw early in 2026. Some lenders are already quoting variables below comparable fixed terms when bond yields are elevated.

• Fixed rates will remain sensitive to bond yields, which move in anticipation of policy and inflation trends.

Practical moves for homeowners and buyers

1. Time your renewal: If your renewal is in 2026, start the conversation 4–6 months early to shop options and lock windows. The Canadian Mortgage Charter expects lenders to contact borrowers early and provide relief options for those under stress.

2. Consider term mix: If you want flexibility, explore a shorter fixed term or variable; if you prefer budget certainty, compare 3‑ to 5‑year fixeds against your cash‑flow goals.

3. Stress‑test yourself: Even if qualification rules change, model payments at +2% above your rate to protect your budget. (Lenders still assess risk with conservative debt‑service ratios.)

Bottom line

2026 looks like a stabilization year: steadier policy rates, gradual resale recovery, and more room for strategic renewals. If you’re buying or renewing, get advice early—small rate and term decisions have outsized impact over time.