Mortgage Rate Outlook for Early 2026

Mortgage Rate Outlook for Early 2026

Most major economists and financial institutions currently expect the Bank of Canada to hold its overnight policy rate steady in early 2026:

• The Bank of Canada held its policy rate at 2.25 percent in December 2025 and signaled no imminent changes.

• Economists’ surveys and market pricing show that further rate cuts are unlikely and that the rate will remain around 2.25 percent through much of 2026.

• Some forecasts even suggest the easing cycle is over, and that slight tightening later in the year is possible — but not expected in Q1.

What this means:
The central policy rate, which influences variable mortgage costs, is expected to stay stable in Q1 2026 unless inflation surprises to the upside.

Mortgage Rate Direction in Q1 2026

Variable Rate Mortgages

• With the BoC policy rate steady, most forecasts show variable mortgage rates staying competitive, generally below 4 percent for top variable products.

• Because variable rates are tied directly to prime, unchanged policy means variable payments are likely to stay flat or only slightly different in early 2026.

Fixed Rate Mortgages

• Fixed rates are influenced more by bond market yields than central bank policy.

• Many analysts expect that fixed mortgage rates could remain steady or edge slightly higher in 2026, as bond yields have risen compared with their mid-2025 lows.

Summary of What Experts Are Saying for Early 2026

• Policy rate: Expected to stay around 2.25 percent in Q1 2026.

• Variable mortgage rates: Likely remain at current competitive levels (sub-4 percent for many products) if prime remains unchanged.

• Fixed mortgage rates: May stay similar to current levels or rise modestly if government bond yields firm up.

• Market risk: Some forecasters show that if inflation trends higher or economic conditions change, small hikes or adjustments later in 2026 become more likely, but not expected in Q1.

What This Means for You

• Borrowers renewing or locking in early in the year should expect near-stable interest costs, with variable rates remaining a possible advantage if policy holds.

• Fixed rates might be less volatile, but could trend slightly higher if long-term yields rise.

• Planning early, especially before major Central Bank announcements (January 28, March 18), gives you more flexibility to adjust to shifts.