After the steepest rate-cutting cycle in a generation, Canada's mortgage market has entered a holding pattern — and a genuinely uncertain one. The Bank of Canada has kept its overnight rate parked at 2.25% for six consecutive announcements, but bank economists are now split on what happens next: some see rates staying flat through 2027, others see hikes creeping back in before this year is out. This guide breaks down where fixed and variable rates stand today, what's really driving them, how CMHC, CREA, and the Big Six banks disagree on the 2026–2028 outlook, and what it means if you're buying, renewing, or investing.
Key Takeaways
- The Bank of Canada overnight rate has held at 2.25% since October 2025 — six straight announcements without a move.
- The best insured 5-year fixed rates sit around 3.9%–4.0%; the best insured 5-year variable rates sit around 3.25%–3.5%.
- Big bank forecasts diverge sharply: TD and CIBC expect the overnight rate to hold at 2.25% through 2026, while Scotiabank and National Bank see a hike to 2.75% by year-end, and RBC projects hikes continuing into 2027 toward 3.25%.
- CMHC downgraded its 2026 outlook in July, now expecting home sales, prices, and housing starts to all decline — a sharp reversal from its earlier, more optimistic call.
- Fixed mortgage rates face modest upward pressure from elevated Government of Canada bond yields, even though the Bank of Canada itself is on hold.
1. Today's Canadian Mortgage Rate Snapshot (August 2026)
Rates shift daily across lenders, but here's where the market stands this week, based on data from Ratehub, WOWA, and Bank of Canada posted-rate tracking:
Among the Big Six banks, Scotiabank has recently offered the lowest advertised 5-year fixed rate at around 4.24%, while independent brokers and monoline lenders have pushed exclusive rates as low as 3.94% for insured (high-ratio) borrowers. Shorter terms have also gained popularity: the lowest 3-year fixed rate is running near 4.04%, reflecting many borrowers' bet that rates could look different at renewal in three years than in five.
Payment Reality Check
On a $500,000 mortgage at 4.04% with a 25-year amortization (standard Canadian semi-annual compounding), monthly principal and interest run about $2,641. That's meaningfully better than the 2023 peak, when the same mortgage would have cost several hundred dollars more per month — but it's no longer improving quickly.
2. The Bank of Canada Rate Path, 2022–2026
Canada's overnight rate climbed aggressively from near-zero in 2022 to a peak of 5.00% in mid-2023, then entered one of the sharpest easing cycles in Bank of Canada history through 2024 and into late 2025, before settling into its current hold.
3. What's Driving Canadian Rates in 2026
1. Inflation is stuck slightly above target
Canadian CPI inflation climbed to around 2.8% in April 2026, pushed up largely by Middle East energy price spikes tied to the renewed Iran conflict. That's not a crisis level, but it's enough above the Bank's 2% target to make policymakers wary of cutting further.
2. A genuinely divided economic picture
Unemployment sits at roughly 6.5%–7%, with what economists describe as a "low-hire, low-fire" labour market — not a downturn, but clearly soft. GDP growth is projected at just 0.7% for 2026 before firming to around 1.8% in 2027 and 2028. That combination of soft growth and above-target inflation is exactly why the Bank of Canada has been content to sit still: growth is too weak to justify a hike, but inflation is too sticky to justify a cut.
3. U.S. tariffs remain the biggest wildcard
Renewed U.S. tariff threats — including a proposed 50% tariff with an August 19 deadline — are flagged by the Bank of Canada as a top risk to growth. Tariffs cut both ways for policy: they slow the economy (arguing for cuts) while also raising import prices (arguing against them), which is part of why the Bank's own guidance has grown less certain.
4. Fixed rates follow bonds, not the Bank of Canada
As in most markets, Canadian fixed mortgage rates track Government of Canada bond yields rather than the overnight rate directly. Five-year bond yields have pushed toward 3.2%, and have risen by roughly 0.35–0.40 percentage points since the latest Iran-related flare-up. That's why fixed rates have crept upward even while the Bank of Canada itself hasn't moved at all in 2026.
4. The Bank of Canada's Next Move
The next scheduled rate announcement lands on September 2, 2026. After six consecutive holds, most economists expect a seventh, but the range of outside views is wide: some economists still flag a possible cut in the second half of 2026 if the tariff conflict deepens, while others — including forecasters at Scotiabank and National Bank — now lean toward the Bank's next move being a hike, not a cut.
Why Bank Forecasts Are Unusually Split Right Now
TD Economics and CIBC expect the overnight rate to hold at 2.25% through 2026 and beyond. Scotiabank and National Bank project a hike to 2.75% by the end of 2026. RBC goes further, projecting hikes extending into 2027 and pushing the overnight rate back toward 3.25%. This is a wider forecast spread than Canadian markets have seen in several years, reflecting genuine uncertainty about whether tariffs will ultimately hurt growth more than they lift inflation.
5. 2026–2028 Forecast Comparison
The disagreement among Canada's biggest banks isn't just about the overnight rate — it flows straight through to fixed mortgage pricing.
| Bank / Agency | 2026 Outlook | 5-Yr Fixed by End of 2026 | Notes |
|---|---|---|---|
| TD Economics | Hold at 2.25% | ~4.0%–4.3% | Sees holds extending through 2031 |
| CIBC | Hold at 2.25% | ~4.0%–4.3% | Steady policy stance expected all year |
| Scotiabank | Hike to 2.75% | ~4.5%–4.9% | Cites tariff-driven inflation risk |
| National Bank | Hike to 2.75% | ~4.5%–4.9% | Aligned with Scotiabank's hawkish view |
| RBC | Hikes into 2027 toward 3.25% | Highest of the group | Most hawkish multi-year path |
Independent aggregators broadly agree with the hawkish-leaning camp on fixed rates: some forecasts apply a 0.25–0.50 percentage point increase to current five-year special offers, pushing typical five-year fixed rates into the high-4% to near-5% range by the end of 2026, with a further drift toward 4.7%–5.1% possible by 2028 if inflation proves stubborn.
6. Home Prices, Sales & Housing Starts in 2026
The most striking recent development isn't in rates at all — it's a sharp downgrade to Canada's housing outlook from the country's national housing agency.
- National average price (CMHC): Forecast to fall 0.6% in 2026, to about $675,200 from $679,543 in 2025.
- Home sales (CMHC): Forecast at 457,200 units in 2026, down 2.8% from 2025's 470,314 — a downgrade from CMHC's own earlier call for growth.
- Housing starts (CMHC): Projected to decline to roughly 247,000 units nationally in 2026, down from about 259,000 in 2025, with condo starts falling sharply in Toronto and Vancouver.
- Rental market: Purpose-built rental vacancy in the Greater Toronto Area has risen to around 3% — its highest since the pandemic — as immigration slows and new condo-rental supply comes online.
Why CMHC Just Downgraded Its Forecast
CMHC's February 2026 forecast had called for both sales and prices to rise this year. Its July update reversed that entirely, citing economic uncertainty, slower population growth, elevated borrowing costs, and modest income growth as the key drags on demand. Canada–U.S. trade uncertainty was also cited as a weight on business investment and hiring.
7. Three Scenarios: Bull, Base & Bear Case
Bull Case (Rates Fall)
Tariff tensions ease, trade uncertainty fades, and soft labour-market data pushes the Bank of Canada toward a cut. Bond yields retreat and 5-year fixed rates drift back toward the high-3% range by late 2027.
Base Case (Rates Hold)
Consistent with TD and CIBC: the overnight rate stays at 2.25% through 2026 and into 2027, with 5-year fixed rates drifting only modestly higher, into the low-to-mid 4% range.
Bear Case (Rates Rise)
Consistent with Scotiabank, National Bank, and RBC: tariff-driven inflation proves persistent, the Bank hikes to 2.75%–3.25% through 2027, and 5-year fixed rates push toward 4.9%–5.1%.
Stakeholder Advisory: What to Do Right Now
For First-Time Homebuyers
- Insured (high-ratio) borrowers currently access the lowest rates in the market — get pre-approved and compare monoline lenders against the Big Six, since spreads of 0.3–0.5 percentage points are common.
- Don't assume rates will be materially lower next year; three of five major bank forecasts in this article point toward higher, not lower, fixed rates by year-end.
- Stress-test your budget against the higher end of the forecast range (4.5%–4.9%), not just today's best advertised rate.
For Homeowners Renewing in 2026–2027
- If you locked in during 2020–2021 at sub-2% rates, expect a substantial payment increase at renewal regardless of which forecast proves right — start budgeting for it now.
- Consider a shorter (2–3 year) fixed term if you believe the bull case, or lock a 5-year term if you want to avoid the risk of the bear case scenario materializing.
- Get a renewal rate hold 90–120 days before your term ends; you are not obligated to stay with your current lender.
For Fixed vs. Variable Decision-Makers
- Variable rates (~3.25%–3.5%) are currently cheaper than fixed (~3.9%–4.0%) but carry more forecast uncertainty given the split among bank economists on the Bank of Canada's next move.
- Variable-rate borrowers should have enough budget flexibility to absorb a scenario where the overnight rate rises to 2.75%–3.25% over the next 12–18 months.
For Real Estate Investors & Developers
- CMHC's downgraded starts forecast (~247,000 units, down from ~259,000) signals tightening future supply in some markets — particularly condos in Toronto and Vancouver — worth weighing against near-term softness in prices and sales.
- Rising purpose-built rental vacancy in the GTA (~3%) suggests softer near-term rent growth in that specific market even as national fundamentals stay tight.
- Underwrite new acquisitions using the bear-case rate range (up to ~5%), not the most optimistic bank forecast, given how wide the current spread of opinion is.
8. Frequently Asked Questions
Will mortgage rates go down in Canada in 2026?
It's genuinely uncertain. TD and CIBC expect the Bank of Canada to hold at 2.25% through 2026, which would keep variable rates roughly stable. Scotiabank, National Bank, and RBC expect hikes instead, which would push both variable rates and, indirectly, fixed rates higher.
Is it better to choose a fixed or variable mortgage rate right now?
Variable rates are currently lower (~3.25%–3.5% vs. ~3.9%–4.0% fixed), but the forecast spread among major banks is unusually wide this year. Borrowers who can't absorb a potential rate increase over the next 12–18 months may prefer the certainty of a fixed rate.
Why did CMHC downgrade its 2026 housing forecast?
CMHC cited economic uncertainty, slower population growth, elevated borrowing costs, modest income growth, and Canada-U.S. trade uncertainty as reasons for revising its outlook from growth to decline in sales, prices, and starts.
When is the next Bank of Canada rate announcement?
The next scheduled announcement is September 2, 2026. Markets widely expect a seventh consecutive hold, though a small minority of economists still flag a possible cut later in the year.
Should I lock in a longer mortgage term now?
It depends on your view of the forecast spread. If you expect the more hawkish bank forecasts (Scotiabank, National Bank, RBC) to prove correct, locking a 5-year fixed rate now provides more protection. If you expect the Bank of Canada to hold or eventually cut, a shorter term or variable rate may cost less over time.
Run Your Own Renewal or Refinance Numbers
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Sources
- WOWA.ca, "Best Mortgage Rates Canada" & "Interest Rate Forecast" (August 2026)
- Ratehub.ca, "Best 5-Year Fixed Mortgage Rates" & "Canada Interest Rate Forecast" (July–August 2026)
- Canadian Mortgage Trends, "Housing and Interest Rate Forecasts for 2026" (January 2026)
- Canadian Mortgage Trends, "CMHC Forecasts Home Price Declines as Housing Slowdown Deepens" (July 2026)
- Mortgage Sandbox, "Canada Mortgage Rate Forecast 2026 to 2028"
- True North Mortgage, "Mortgage Rate Forecast (2026–2030)"
- nesto.ca, "Mortgage Rates Forecast Canada 2026-2030"
- HouseIndex.ca, "2026 Canadian Housing Forecast"
