Bank of Canada Rate Forecast 2026: What Homeowners Should Expect

Bank of Canada Rate Outlook for 2026

The Bank of Canada's monetary policy decisions have a direct impact on every Canadian homeowner and prospective buyer. As we head into 2026, understanding where rates are headed can save you thousands of dollars on your mortgage.

After a period of rate cuts through 2025, the Bank of Canada is now navigating a more stable environment. Here's what the data tells us about the rate environment ahead for 2026.

Current Economic Indicators

Several key factors are influencing the Bank of Canada's rate decisions:

What Economists Are Predicting for 2026

Major Canadian banks have released their forecasts:

• RBC: Expects rates to stabilize with potential for 1-2 additional cuts
• TD: Predicts policy rate settling around 2.75-3.00%
• BMO: Forecasts gradual normalization through 2026
• Scotiabank: Anticipates steady rates with possible modest easing

Fixed vs Variable Rate Outlook for 2026

Fixed Rate Mortgages

Fixed rates are influenced by bond yields, which have stabilized after the 2025 easing cycle.

Current 5-Year Fixed Range: 3.89% - 4.49%
Predicted 2026 Range: 3.69% - 4.29%

Variable Rate Mortgages

Variable rates move directly with the Bank of Canada's overnight rate.

Current Variable Rate Range: Prime - 0.75% to Prime + 0.25%
2026 Outlook: Stable with possible modest further savings

What This Means for Homeowners

If You're Renewing

1. Start early: Begin shopping 120 days before your renewal date
2. Lock in a rate hold: Secure today's rate while watching for improvements
3. Consider shorter terms: A 3-year term gives flexibility if rates drop further

If You're Buying in 2026

• Pre-approvals lock in current rates for 90-120 days
• Both fixed and variable rates are attractive compared to 2023-2024
• Stress test qualification has improved significantly

If You're Refinancing

Lower rates make refinancing more attractive in 2026, especially if you locked in at peak 2023-2024 rates.

Frequently Asked Questions

Will the Bank of Canada cut rates further in 2026?

Most economists expect 0-2 additional rate cuts in 2026, totaling 0-50 basis points. The major easing cycle is largely complete.

Should I choose fixed or variable in 2026?

If you believe rates will drop significantly, variable offers more upside. If you prefer payment certainty, fixed rates are already competitive.

How much will my mortgage payment change with rate cuts?

For every 0.25% rate decrease, a $500,000 mortgage saves approximately $75-80/month.

Get Personalized Advice

Every mortgage situation is unique. Contact us for a free consultation to discuss how 2026 rate changes affect your specific situation.