Here's what mortgage borrowers in Canada can expect in 2026
It’s helpful for homeowners or prospective homebuyers to be in the know about the latest mortgage updates in Canada.
A new year means possible changes to mortgage rates and shifts in the housing market in Canada. To keep you informed, Ratehub.ca mortgage expert Penelope Graham shares her 2026 mortgage and housing market predictions.
Stability for variable mortgage rate borrowers in Canada
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Graham says variable mortgage rates will be stable this year, barring any economic surprises.
“The Bank of Canada has taken a rate-hold stance, and has signalled it will remain for the foreseeable future,” she explains. “In both its October and December rate announcements, the Bank’s Governing Council emphasized they feel the current policy rate is ‘about right’ to support economic conditions, which continue to adapt to the evolving trade landscape.”
In the final interest rate announcement of 2025, the Bank of Canada (BoC) held the key interest rate at 2.25 per cent.
“Overall, the Bank expects inflation — a key pillar of its decision making – to remain close to its 2 per cent target in 2026, before trending upward at year’s end as the economy strengthens, which may open the door to a rate increase in early 2027,” says Graham.
Variable rates vs. fixed rates in 2026
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Graham predicts that variable rates will become more popular this year as fixed mortgage rates in Canada face volatility.
“For the first time in three years, variable-rate mortgages are below that of fixed; the lowest five-year variable option in Canada is 3.45 per cent, compared to the current fixed low of 3.94 per cent,” she explains.
“That’s currently a 49-basis-point difference, and that spread may widen further, especially as there are a number of market factors that could keep bond yields — and fixed mortgage rates — elevated throughout the new year.”
The mortgage expert says borrower interest in variable rates rose as the BoC introduced additional rate cuts in the fall of 2025. Ratehub.ca saw a 25.7 per cent increase in questions about variable-rate mortgages on a year over year bases in 2025, compared to just seven per cent in 2024.
How much more do fixed-rate mortgage borrowers pay in Canada in 2026
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According to Graham, fixed-rate borrowers will pay 26 per cent more when renewing this year.
“In the latter half of 2023 and early 2024, mortgage market watchers — including the Bank of Canada — sounded the alarm on the viability of mortgage renewals this year and next,” she says.
“With rates sharply higher than they were in 2020 and 2021 — when many of today’s renewing five-year terms were taken out — there was concern that a great number of borrowers would face payment shock when renewing, leading to a wave of mortgage defaults.”
Luckily, this didn’t happen, and lower mortgage rates (compared to late 2023) have taken the edge off for borrowers, adds Graham.
“While still renewing into higher payments, they’re more manageable, especially when combined with the fact that renewing borrowers have paid off more of their mortgages, and have built up greater equity,” she explains.
The expert provided an example of a renewal calculation for a fixed-rate mortgage using Ratehub.ca’s mortgage payment calculator:
A homeowner who put a 10 per cent down payment on a $607,280 (the average home price in Canada as of December 2020 according to the CREA) home with a five-year fixed rate of 1.39 per cent (the best rate they could receive five years ago) amortized over 25 years (total mortgage amount of $563,495) would have had a monthly mortgage payment of $2,224.
When renewing in December 2025, they would have a mortgage balance of $465,843, a five-year fixed rate of 3.94 per cent (today’s best renewal rate) and a new monthly mortgage payment of $2,800.
“This means that the homeowner will pay $576 more per month (a 26 per cent increase) or $6,912 more per year on their mortgage payments,” explains Graham.
How much more variable rate borrowers will pay in 2026
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Graham says variable borrowers will pay four per cent more this year.
In December of 2020, a homeowner who put a 10 per cent down payment on a $607,280 home with a five-year variable rate of 0.99 per cent (the best rate they could receive five years ago), amortized over 25 years (total mortgage amount of $563,495), would start with a monthly mortgage payment of $2,121.
By December 2025 (at the end of the five-year mortgage term), the homeowner’s effective variable mortgage rate would have increased to 2.99 per cent, and their monthly payment would have increased to $2,690.
This comes after 10 rate hikes between March 2022 and July 2023, followed by nine rate cuts between June 2024 and October 2025.
When renewing in December 2025, they would have a mortgage balance of $485,535, a five-year variable rate of 3.45 per cent (today’s best five-year variable renewal rate) and a new monthly mortgage payment of $2,797.
“The total impact for the homeowner is $107 more per month (a 4 per cent increase) compared to their current mortgage payment. This is equivalent to $1,284 more per year,” explains Graham.
What the housing market will look like in 2026
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Graham says Canada’s housing market didn’t meet expectations in 2025, citing U.S. tariff threats and a volatile market as the reason why many buyers experienced decision paralysis.
“As a result, inventory has steadily built up in many of Canada’s biggest real estate centres, tilting conditions firmly in favour of buyers,” she explains.
“While sales started to pick up slightly in the latter half of the year, home prices have yet to reheat, though remain well above incomes in most big markets. With the Bank of Canada resuming a rate hold, there’s zero rate relief on the horizon — and that will do little to stoke demand. However, for motivated buyers, ample choice and bottomed-out mortgage rates provide a great opportunity to get into the market now, which could materialize into a small post-holiday bump in activity.”