Mortgage News & Analysis

Mortgage Rate Forecast Canada 2026: Are Fixed or Variable Rates Better Now?

Published July 18, 2026 | LeSolace Corporation

Canadian borrowers received more stability than excitement from the Bank of Canada’s July decision. The policy rate was held at 2.25% on July 15, 2026, leaving homeowners and buyers with the same important question: is a fixed or variable mortgage the better choice now?

2026 mortgage rate outlook at a glance

Variable rates may offer value if the Bank of Canada eventually reduces its policy rate, but the timing and size of any future change remain uncertain. Fixed rates provide payment certainty, although they can move independently of the Bank of Canada because lenders also consider bond yields and funding costs.

What changed after the July 2026 Bank of Canada decision?

On July 15, the Bank of Canada maintained its overnight rate target at 2.25%. The Bank said Canada’s economy was showing signs of improvement, while inflation was expected to ease gradually from its recent increase. It also emphasized that uncertainty remained high because of global conflict, oil prices and United States trade policy.

The next scheduled Bank of Canada interest rate announcement is September 2, 2026. That does not guarantee a rate reduction. Between now and then, the Bank will assess inflation, employment, economic growth and global developments.

The latest available Consumer Price Index report at the time of publication showed annual inflation at 3.2% in May. Statistics Canada is scheduled to release June inflation data on July 20. A softer inflation trend could support lower rates over time, while persistent inflation could keep borrowing costs higher for longer.

Mortgage rates Canada: why fixed and variable rates move differently

A Bank of Canada rate hold does not mean every mortgage rate in Canada will remain unchanged.

Variable mortgage rates

Variable mortgage rates are normally priced in relation to a lender’s prime rate. Prime rates are influenced by the Bank of Canada’s overnight rate. When the Bank reduces its policy rate, lender prime rates will often decline by a similar amount, although each lender sets its own prime rate and mortgage discount.

This means a variable rate borrower may benefit sooner if the Bank of Canada begins cutting rates. The tradeoff is uncertainty: rates can also remain unchanged or rise, and the effect on payments depends on whether the mortgage has adjustable payments or fixed payments.

Fixed mortgage rates

Fixed mortgage rates are influenced more directly by Government of Canada bond yields, lender funding costs, competition and risk pricing. Bond yields can change before a Bank of Canada announcement and may move in the opposite direction from the overnight rate.

Therefore, the answer to “are fixed mortgage rates going up?” depends on more than the central bank. If bond yields rise because investors expect stronger growth or higher inflation, fixed mortgage pricing may increase even when the Bank of Canada holds its policy rate. If bond yields fall, lenders may reduce fixed rates without waiting for the next central bank decision.

Fixed vs variable mortgage Canada: which is better now?

There is no single correct choice for every borrower. The better structure depends on cash flow, risk tolerance, expected time in the property, prepayment plans and the mortgage contract itself. Borrowers should compare the complete product, not only the headline rate—and review the available residential mortgage options before committing.

Variable mortgage

Potential advantage: It may benefit from lower lender prime rates if the Bank of Canada reduces its policy rate.

Main risk: Payments or interest costs may increase if rates rise.

May suit: Borrowers who have financial flexibility and can tolerate rate changes.

Fixed mortgage

Potential advantage: It provides a known rate and predictable payments for the selected term.

Main risk: The borrower may remain locked into the rate if market pricing falls, and the penalty to leave early can be significant.

May suit: Borrowers who value stability and need a dependable monthly budget.

A variable mortgage may be worth considering when:

You have room in your budget for possible payment or interest cost changes.
You believe rates may decline, but understand that no decrease is guaranteed.
The contract offers reasonable conversion and prepayment terms.
You are comfortable reviewing the mortgage as market conditions change.

A fixed mortgage may be worth considering when:

You need predictable payments and cannot comfortably absorb an increase.
You prefer certainty over the possibility of future savings.
You expect to keep the mortgage for most or all of the selected term.
You have reviewed the lender’s prepayment privileges and penalty calculation.

3 year versus 5 year fixed mortgage in 2026

The traditional five year fixed mortgage is no longer the automatic choice for many Canadians. CMHC reported that borrowers have increasingly selected shorter fixed terms and variable rate mortgages because of rate uncertainty.

A three year fixed mortgage can provide short term payment stability while allowing the borrower to renew sooner if rates are lower later. However, it also creates earlier renewal risk. A five year fixed mortgage provides a longer period of certainty, but the borrower may remain at the contracted rate for longer if market pricing falls.

3 year fixed mortgage

Rate certainty: Three years.

Renewal timing: An earlier opportunity to obtain a new rate, but also earlier renewal risk.

Possible fit: Borrowers seeking a middle ground between flexibility and payment certainty.

5 year fixed mortgage

Rate certainty: Five years.

Renewal timing: A later renewal with a longer commitment to the selected rate.

Possible fit: Borrowers who place the greatest value on longer payment stability.

The lowest advertised rate should not be the only deciding factor. Compare the annual percentage rate where applicable, prepayment options, portability, restrictions, conversion terms, penalties and whether the mortgage is a standard charge or collateral charge. A borrower considering a larger structural change can also review how to refinance a mortgage strategically before replacing an existing loan.

Mortgage renewal 2026: why borrowers should start early

Mortgage renewals remain the largest category of mortgage transactions in Canada. CMHC’s 2026 Mortgage Consumer Survey found that 66% of surveyed mortgage transactions were renewals. It also reported that 35% of renewing borrowers faced higher payments, with an average increase of $375 per month.

The Bank of Canada has said that the final group of five year fixed mortgages taken during the pandemic will renew over the next 12 months. This group represents approximately 12% of outstanding Canadian mortgages and is expected to experience an average payment increase of about 15%.

Borrowers should generally begin reviewing a mortgage renewal several months before maturity. Starting early provides time to compare the existing lender’s offer with other options, correct credit report issues, gather income documents and consider whether the mortgage structure still matches current goals. This is especially important when income has changed, debt has increased or the borrower may need to switch from a standard lender to a different lending category.

Before accepting a renewal offer, review:

The new interest rate and estimated payment.
The remaining amortization and total interest cost.
Fixed, variable and shorter term alternatives.
Prepayment privileges and possible penalties.
Whether consolidating higher interest debt is appropriate.
Qualification requirements if switching lenders or refinancing.

Mortgage rate forecast Canada 2026

The most reasonable outlook is for continued uncertainty rather than a straight line decline in mortgage rates. The Bank of Canada’s July statement indicates that economic growth is improving and inflation is expected to ease, but global energy prices, trade policy and geopolitical risks could change that path.

Variable mortgage rates could decline if the Bank eventually reduces its overnight rate. Fixed rates may also fall, but they will continue to respond to bond market expectations and lender funding conditions. This means fixed rates could move before, after or independently of a Bank of Canada decision.

Borrowers should treat any 2026 mortgage rate forecast as a planning range, not a promise. The right decision is the mortgage that remains manageable even when the forecast is wrong.

The LeSolace view

A variable rate may be suitable for borrowers with stronger cash flow and a genuine ability to manage uncertainty. A three year fixed term may offer a practical compromise for borrowers who want stability without committing for five years. A five year fixed term remains appropriate when dependable payments are more important than trying to time the market.

The final choice should be based on the full mortgage contract, not only the headline rate.

Speak with LeSolace before committing

Whether you are purchasing, refinancing or approaching a mortgage renewal in 2026, reviewing more than one lender and mortgage structure can help you make a better informed decision. LeSolace Corporation can assess fixed and variable options, term lengths and lender requirements based on your financial circumstances and the options available in your province. Borrowers whose income does not fit standard bank guidelines can review our self employed mortgage options. Files involving credit, income or debt ratio challenges may also benefit from understanding how alternative lending qualification works.

Telephone: 1 888 622 2671
Website: lesolace.com
Mortgage review: Contact LeSolace

Sources

Shaun McCandless

CEO / Mortgage Broker

LeSolace Corporation

lesolace.com | 1 888 622 2671