After seven consecutive Bank of Canada rate cuts since June 2024, home equity loan rates in Canada have dropped significantly. With the overnight rate now at 2.25% and prime sitting at 4.45%, borrowers in February 2026 are seeing some of the most competitive second mortgage pricing in years.
But home equity loans still carry higher rates than first mortgages — because they sit in second position, lenders charge a risk premium. The good news? That gap has narrowed, and today's rates are far more attractive than they were 18 months ago.
Current Rate Landscape (February 2026)
Home equity loan rates in Canada have come down roughly 1–1.5% from their 2024 peaks, tracking the Bank of Canada's aggressive easing cycle.
Rates by Lender Type
| Lender Type | Rate Range | LTV Maximum | Qualification |
|---|---|---|---|
| Major banks (RBC, TD, BMO, etc.) | 5.49% – 6.99% | 80% | 650+ credit, full income docs |
| Credit unions | 5.29% – 6.49% | 80% | 620+ credit, member required |
| B-lenders (Equitable, Home Trust) | 6.99% – 8.99% | 85% | 550+ credit, flexible docs |
| Private lenders | 7.99% – 11.99% | 85–90% | Equity-focused, any credit |
Rates as of February 2026. Your actual rate depends on credit, LTV, and property type.
Why Rates Are Higher Than First Mortgages
When you take out a home equity loan, your original mortgage lender gets paid first if anything goes wrong. The home equity lender is "second in line," which means more risk — and higher rates to compensate.
Think of it this way: If your home sells for less than the total debt in a forced sale, the second mortgage lender takes the loss. That risk premium is reflected in the rate.
How the Bank of Canada's Rate Cuts Affected Home Equity Rates
The BoC cut its policy rate from 5.00% in mid-2024 to 2.25% by early 2026 — a 275 basis point reduction. Prime dropped from 7.20% to 4.45%, pulling variable-rate HELOCs down sharply. Fixed-rate home equity loans followed with a lag, but the reductions are now fully reflected in lender pricing.
Bottom line: If you were quoted 8–9% for a home equity loan in 2024, it's worth getting re-quoted today — you could be looking at 5.49–6.99% with the same profile.
Factors That Determine Your Rate
1. Credit Score
Your credit score is the single biggest factor in your rate.
| Credit Score | Expected Rate Premium |
|---|---|
| 750+ | Lowest available rates (5.49–5.99%) |
| 700–749 | +0.25–0.50% |
| 650–699 | +0.50–1.00% |
| 600–649 | +1.00–2.00% (B-lender territory) |
| Below 600 | +3.00–5.00% (private lender territory) |
2. Loan-to-Value Ratio
Lower LTV = lower rate. Borrowing 60% LTV is cheaper than 80% LTV because the lender has more equity cushion. With Canadian home values stabilizing in early 2026, many homeowners have significant equity to work with.
3. Property Location and Type
Urban properties in the GTA, Vancouver, and Ottawa get the best rates. Rural properties and condos may face slightly higher pricing due to perceived liquidity risk.
4. Loan Amount
Very small loans (under $25,000) sometimes carry higher rates because fixed costs make them less profitable for lenders. The sweet spot is typically $50,000–$250,000.
5. Term Length
Shorter terms (1–3 years) typically have lower rates than longer terms (10–25 years) — similar to first mortgage term pricing.
How to Get the Lowest Rate in 2026
Work With a Mortgage Broker
Brokers access dozens of lenders simultaneously. The rate difference between the first lender you call and the best available rate can be 1–2% — worth thousands over the life of the loan. In the current competitive environment, brokers are seeing particularly aggressive pricing from credit unions and monoline lenders.
Improve Your Credit Score First
If your score is below 650, spending 3–6 months improving it before applying could save you more in interest than the delay costs. Pay down credit card balances below 30% utilization — this alone can boost your score 30–50 points.
Keep LTV Low
Borrow only what you need. If you have $200,000 in available equity but only need $80,000, you'll get a better rate at the lower LTV.
Lock In While Rates Are Low
With the BoC signalling a potential pause in its cutting cycle, today's rates may represent a near-term floor. If you're considering a home equity loan, getting pre-approved now locks in current pricing.
Provide Full Documentation
Lenders offer their best rates to borrowers who provide complete income documentation. "Stated income" programs charge 0.5–1.5% more.
Home Equity Loan vs Other Borrowing Costs (February 2026)
| Product | Typical Rate | Secured? |
|---|---|---|
| First mortgage (5-yr fixed) | 3.69–4.99% | Yes |
| Home equity loan | 5.49–8.99% | Yes |
| HELOC | 4.95–6.45% (Prime + 0.5–2%) | Yes |
| Personal line of credit | 7–11% | No |
| Personal loan | 9–14% | No |
| Credit card | 19.99–29.99% | No |
Even at the higher end, a home equity loan at 9% beats credit card rates by over 10 percentage points — and the interest savings on $50,000 would be $5,500+ per year compared to carrying that balance on a credit card.
The Rate Window Is Open
With the Bank of Canada's aggressive easing cycle now largely complete and rates near multi-year lows, February 2026 is one of the best times in recent memory to explore a home equity loan. The spread between first and second mortgage rates has compressed, and lender competition is driving competitive offers.
The best approach is to get pre-qualified with a broker who can show you real rates from multiple lenders — not advertised rates that may not apply to your situation.
Read our complete guide to home equity loans in Canada
Ready to Get Started?
Contact us today for personalized mortgage advice and competitive rates.
