What to expect for mortgage rates in 2026 to 2030

What's Next for Rates? Dan's Take

The next Bank of Canada rate decision is coming up — and Dan's watching the signs that could point to another cut, a hold, or a shift in tone. Here's what he's seeing right now.

Will the next Bank of Canada move be a cut or a hike?

The Bank of Canada’s (BoC's) policy rate, also called the overnight rate, affects bank prime rates, which in turn move variable mortgage rates. Fixed mortgage rates follow the bond market, which can move to anticipate changes to the prime rate.

Any hopes of near-term interest rate cuts are now buried by current inflation risks. The latest projections of 3.4% annualized growth for Q2 2026 — plus another month of improving labour market numbers — have erased recession concerns. That same economic warmth, ironically mostly led by a revving Canadian oil and gas sector in response to restricted global oil supply, could feed into energy inflation.

Higher energy prices pose a risk, but they're also cooling demand and prices in other sectors, staving off a rate hike for now. Headline July inflation rose to 3.0%, but only half of the CPI basket's components are currently above 3%, and average core inflation sits midway in the central bank's 1-3% target range. Gas prices rose 25.7% in July, but the spillover effect into other sectors is being contained so far.

The economy is once again at risk from U.S. trade disruption. The Bank of Canada lists Trump's 50% tariffs imposed on August 21 as a top growth risk. Retaliatory Canadian tariffs on U.S. goods start on September 8 — the next date before which intense negotiations could resume to avoid them.

The bottom line? The Bank of Canada is still likely to hold its rate through the fall of 2026, as forecasts reflect an economic stalemate staring everyone in the face — inflation risky enough to thwart a cut, and growth risky enough to block a hike.

By year-end 2026, I see about an 80% chance that the policy rate will hold, a 15% chance of a hike, and a 5% chance of a cut.

Conditions that could prompt a BoC policy rate hike by year's end:

• Supply disruption from fresh U.S. trade escalation could raise business input prices that could be passed to consumers.
• Energy inflation could seep into broader CPI baskets, raising both headline and core inflation.
• Economic heat could heat demand and raise prices across the economy.
• Months of elevated oil and gas prices can sustain expectations of higher inflation, creating an environment in which businesses keep prices higher to recoup costs.
• Oil demand that has fallen substantially during the Iran conflict could resurge, creating demand that feeds inflation.
• U.S. inflation is well above the Fed target of 2.0%, which can impact Canadian pricing (the U.S. is still our largest trading partner).
• Canadian and U.S. government spending and debt are growing — and inflationary.

Factors that could see another cut to the BoC policy rate this year:

• The U.S. trade relations just got a whole lot worse, and if unresolved, could quickly tip the scales downward on growth and labour, requiring another rate cut to support economic recovery.
• Energy prices would need to ease to pre-war levels and remain stable (and markets would need to believe in that stability).
• Trade disruption could also slow inflation's pace to pave the way for a rate cut

What's for certain? There's no doubt that many Canadians are facing financial challenges as everyday goods and services become increasingly expensive, and businesses remain wary of the volatility they could face this year.

For now, the Bank of Canada is sticking to a weatherworn approach: stay measured when uncertainty is high.

Rate uncertainty is nudging more homebuyers off the sidelines. Mortgage rates aren't at the bottom, but they aren't high either. Historically speaking, interest and mortgage rates today sit near the midpoint. With both a BoC cut or a hike possible this year, at True North, we've seen a roughly 20% average uptick in home purchases since early spring (coinciding with the start of the U.S.-Iran conflict), as buyers tired of trying to time the market instead took advantage of rate deals and stable home prices in some Canadian centres.

In fact, housing industry growth helped contribute to the positive GDP picture for May 2026.

What's in store for the next BoC announcement on September 2, 2026?

Most experts, including myself, agree that the Bank of Canada will stay on the sidelines again for its late-summer decision.

Here are the rate market odds so far on the BoC's September announcement (courtesy of bankofcanadaodds.com, as of August 21, 2026):

• 25 bps rate hike: 6% probability
• No change: 94% probability

*60% is considered the magic number in calling the rate-decision odds

Stay tuned!

Cut, pause, or hike? How the latest economic readings predict where rates may go next.

We break down key factors, such as inflation, jobs, and GDP, and what they currently signal for future interest and mortgage rate moves. Want an even deeper dive into the factors? Read here

• INFLATION (MOST IMPORTANT FACTOR) – PAUSE
  July 2026 CPI (Canadian Price Index) unexpectedly climbed to 3.0% from last month's 2.8% as oil prices rose again, with a World Cup travel pricing hangover adding to the mix; core inflation (the average of median and trimmed measures) edged up to 2.0% from June's 1.9%, but still allows the BoC room to look past inflation risks in the near-term (next reading Sep 14)
  
• LABOUR MARKET – PAUSE
  Canada's July 2026 labour market report saw a robust 75K job gain and an unemployment rate dip to 6.4% from last month's 6.5%, the lowest level in 2 years; businesses have increased their workforce by about 146K jobs so far this year (next reading Sep 9)
  
• WAGES – PAUSE
  June's average wage growth fell to 2.8% (from last month's 3.3%), which is the lowest annual rate in 4 years, reducing rate hike worries; lower wage pressures encourage businesses to hire and invest (next reading Sep 9)
  
• ECONOMIC GROWTH – STILL PAUSE
  Buh-bye recession talk, hello economic recovery? May 2026 real GDP came in at 0.3% growth (0.1% was expected), led by the oil and gas sector; April was revised higher to 0.6%, and June is pegged at 0.2% — for a Q2 growth projection of 0.8% and 3.4% annualized growth! But let's not get too excited (i.e. Trump tariffs) (Q2 reading on Aug 28)
  
• BOND YIELD MARKET – SHAKY PAUSE
  The Canadian 5-year bond yield is up around 3.3% as inflation risk ranks higher than trade risk (i.e. warming Canadian economy + higher energy prices + government debt); expect energy price volatility and trade rhetoric to be reflected in market ups and downs (hopefully in a tight yin-yang range)

What's the most important economic factor the Bank of Canada considers? The BoC's sole mandate is to control inflation. It uses its policy interest rate (which directly influences bank prime rates) to keep headline inflation close to its 2.0% target and core inflation within the 1.0%-3.0% range.

Other key economic factors can help the BoC determine the inflation path, whether it's likely to rise or fall.

For example, rising unemployment and slow GDP growth may call for a rate cut to stimulate the economy. However, rising inflation may indicate the need to pause or raise rates to curb demand and keep inflation in check.

What economists predict for interest rates (2026-2030)

Dan's outlook is grounded in real-time trends and client feedback — but he also closely monitors the forecasts of leading economists.

• National Bank expects the Bank of Canada policy rate to remain at 2.25% through 2026, rise to 2.50% in Q1 2027, and then again to 2.75% in Q2 2027 and remain at that level through 2027.
• TD Economics expects the BoC to keep its policy rate at an average of 2.25% in 2026 and hold through to 2031.
• Scotiabank forecasts the BoC will hold at 2.25% for most of the year, but then rise to 2.75% by the end of 2026, and again to 3.0% by the end of 2027, while warning that tariff‑related uncertainty may delay or reset this path.
• CIBC Economics predicts the BoC policy rate will remain at 2.25% for 2026, then rise to 2.50% by mid-2027, and again to 2.75% by year-end 2027.
• RBC expects the BoC rate to remain at 2.25% through the end of 2026, rise to 2.50% in Q1 2027, then rise to 3.25% by the end of 2027.
• BMO Capital Markets has forecast the BoC rate to remain at 2.25% through 2026 and 2027.
• Desjardins expects the BoC to hold its policy rate through 2026, with a hike in Q2 2027 to 2.5% and another hike in Q3 2027 to 2.75%.
• Capital Economics predicts the BoC policy rate will hold at 2.25% through 2026 and rise to 2.75% in 2027.
• Oxford Economics predicts that the BoC rate will hold at 2.25% through 2026.

Please note: The above rate forecasts are subject to change, and most now include initial forecast reactions to the recent oil price shock.

Also, a majority of economic forecasts are based on a favourable CUSMA review this summer; trade uncertainty and higher energy prices resulting from the Iran conflict are the wild cards in how the economy and interest rates could be affected.

Will rates rise or fall this year? Dan's closer look. 

Energy-related inflation is raising the risk of rate hikes amid U.S. trade uncertainty.

"The U.S. trade war has brought immediate changes for Canadian businesses, and when rules change that quickly, the response or counteractions take time, even years." – Dan Eisner, True North CEO

Today, the prime rate sits around 4.45%, based on the current Bank of Canada policy rate of 2.25%. The latter is about one policy rate cut lower than I had predicted in mid-2025, for a total decline by 2.75% since June 2024.

Despite U.S. trade disruptions, the Canadian economy has weathered the chaos with some resilience (excluding hard-hit sectors such as steel and aluminum). BoC policy rates have little room to fall below current levels until there's more clarity on how the U.S. trade agreement review will resolve.

Now, the ongoing conflict in Iran threatens to drive inflation higher, potentially forcing the BoC's hand to raise its policy rate. With that higher inflation, though, consumer demand may finally see a more pronounced dent, which could help offset the energy bump, keeping the BoC rate on hold or even a notch lower if inflation eases.

Experts are increasingly conflicted about how inflation will affect the economy, especially when it comes to forecasting how long it could persist and its knock-on effects amid U.S. trade disruptions.

Dan's rate prediction for 2026.

I expect the Bank of Canada's policy rate to remain at 2.25% for the next few months, with oil-shock inflation likely to be partially offset by weaker household purchasing power (i.e. less leftover in the budget after paying higher gas and grocery prices).

When U.S. tariffs entered the scene in 2025, some rapid-fire forecasts predicted a 1.5% policy rate and a prime rate of around 3.70%. Never say never — those forecasts could still play out.

However, after the 0.50% policy rate drop in the fall of 2025, the BoC turned hawkish, indicating that it prefers its 'neutral' rate to work through the economy; it takes 12 to 18 months for the effects of a rate change to fully materialize.

Even with the sudden rise in oil prices affecting household budgets, a rate cut risks injecting stimulus that could increase demand too quickly, resulting in undersupply and putting inflation back on a path to take off again.

Another 0.25% cut this year (taking bank prime rates down to 4.20%) becomes more likely only if higher energy prices deepen economic woes, the U.S. trade review gives way to broader tariffs on more goods, and Canada's economy enters a recession. Or, less probable but still in the realm of possibility, if the global economy takes a sudden downturn due to other geopolitical events, the knock-on effects of spiralling U.S. debt, or an AI stock collapse.

So, even though most experts, myself included, expect rates to remain on pause through 2026, a hike is still on the radar if inflation exceeds 3.5% and looks to be persistent.

As always, my forecast may change when (if?) the clouds of uncertainty part and the trajectory becomes clearer.

What is the BoC's current neutral rate range?

The Bank of Canada's published neutral rate range, which estimates the rate position that neither stimulates nor constrains economic activity, is 2.25% to 3.25%.

The BoC rate is now at the low end of that range, and the central bank may decide to dip its interest-rate vehicle into stimulative territory or raise it to curb conditions that could push inflation higher.

If the economy shows greater weakness than expected, even a rate in the neutral range can feel restrictive, which is why the BoC frames its policy stance as either supportive or restrictive.

Is there a danger that the prime rate could increase?

There's always the risk that bank prime rates (led by the BoC policy rate) could rise to counter inflation. However, the economic softening from higher energy, gas, and grocery prices, tariffs, and trade disruptions makes a rate hike in 2026 less likely.

What about fixed mortgage rates?

Note that bond yields, which inform fixed rates, are affected by a mix of forces.

In the short term, political and economic volatility can cause yields and fixed rates to fluctuate in response to emerging data or global instability. If another interest rate cut is anticipated, expect yields and fixed rates to trend down ahead of a move or to trend up ahead of an expected BoC rate hike.

Under current conditions, fixed mortgage rates are likely to remain relatively steady. For more details, read the Fixed Rate section, plus view forecasts for 2026 to 2030.

Here's a deeper dive into the latest economic numbers.

Why is Canada's inflation higher in July 2026?

Canada's latest CPI (Consumer Price Index) report showed headline inflation in July 2026 unexpectedly rose to 3.0% from last month's 2.8% (instead of cooling to 2.7%), mostly due to surging energy prices as the U.S.-Iran tensions resumed, and travel pricing still seeing a 'World Cup' bump, with vendors not necessarily lowering prices en masse after crowds dispersed.

Grocery prices rose at a slower annual pace, by 3.1% compared to last month's 3.9%, but still the 18th consecutive month this component outpaced headline inflation. Annual shelter inflation eased to just 1.9%, the lowest level since 2020.

Core inflation remains within the BoC's target. The July average of the median and trimmed measures inched up slightly to 2.0% (smack in the middle of the BoC's range of 1-3%), suggesting energy inflation isn't (yet) spreading to the broader economy — though the risk remains, likely keeping the BoC from considering a rate cut this year.

Is Canada's labour market recovering in 2026?

After months of decline earlier this year, the labour market is showing strength mid-year, with July 2026 numbers showing a robust 75K in job growth, mostly in the private sector and spread out across the economy. The unemployment rate dropped again, to 6.4% from last month's 6.5%, the lowest level in two years. Job gains were split between full- and part-time work.

So far this year, Canada's workforce has increased by 146K jobs. Interestingly, wage growth dipped to 2.8% from last month's 3.3% rate, the lowest annual rate in 4 years. Easing wage pressures encourage businesses to hire and invest — and this metric improvement is likely the combined result of trade and energy price influences reducing wage expectations.

However, keep in mind that lower immigration targets and continued outflows, which could bring population growth to near zero in 2026 and 2027, may be skewing labour numbers positively, masking weakness and excess supply. Considerable uncertainty over U.S. trade still exists, which could send labour numbers back down the slide.

Three past months of positive labour numbers are likely to weigh against Bank of Canada rate cuts. If labour continues to improve, and inflation remains elevated, a rate hike may become reality in the coming months.

Could Canada still slip into a recession in 2026?

That's not looking likely at the moment, with Q2 2026 GDP numbers looking up — all the way to a potential 3.4% annualized growth pace, if projected June numbers of 0.2% add to April's 0.6% and May's 0.3% growth pace.

Canada had momentarily entered a technical recession with both Q4 2025 and Q1 2026 showing contraction, but that outlook is over, as the Middle East oil supply shock has brought Canada increased revenue and business in the oil and gas sector, which is having knock-on effects, spurring growth in other industries, such as construction, transportation, warehousing, and manufacturing.

Despite the happier GDP numbers, however, underlying weakness remains, and Q2's stronger growth is likely to smooth down heading into the fall as higher prices erode spending power.

The Bank of Canada had projected real GDP growth of 1.1% for 2026, but with the Q2 surprise growth picture, that forecast may change — and still hinges on how the energy price shock and recently announced U.S. tariffs will play out.

Regardless, Canada's economic resilience continues to hold ground, with recent government GST relief, additional stimulus for trade-impacted sectors, and infrastructure and trade initiatives helping to keep the GDP in 'real' territory as 2026 wears on.

However, last year's up-and-down GDP readings reinforce the Bank of Canada's caution in holding its rate, as it seeks concrete and sustained indications of weakening or strengthening before making another rate decision this year.

How did Canada's GDP fare in 2025?

Overall, Canada's GDP in 2025 grew by a meagre 1.6%. Here's a look at quarterly 2025 GDP (quarter over quarter and annualized pace), reflecting the rollercoaster ride of U.S. trade turmoil since January 2025:

• Q1 2025: +0.5% real, +2.1% annualized
• Q2 2025: -0.2% real, -0.9% annualized
• Q3 2025: +0.6% real, +2.4% annualized
• Q4 2025: -0.2% real, -1.0% annualized (revised downward May 2026)

Also, Statistics Canada recently revised its GDP data for 2022 to 2024, saying the economy expanded by 1.7% more than previously reported over the three years.

How are interest rates affecting mortgage decisions?

As a result of the recent oil shock, Canadian households have seen fixed rates rise to last year's levels, though variable rates remain lower — and it's this rate type that home buyers and owners are choosing most often to purchase or renew, placing the immediate rate savings over the risk of change. 

Many Canadian homebuyers have stayed on the sidelines this year, waiting for another rate drop to make their move. However, amid rate uncertainty, housing sales showed signs of life in May 2026, as buyers nervously eyed the potential for inflation to raise rates and home prices, prompting them to make their (mortgage) move.

Read more here: Housing Market Forecast (2026-2030)

How is the U.S. economy influencing Canada's interest rate outlook?

Like it or not, our countries' economies are closely intertwined.

With a Trump presidency, here are some current concerns:

• Surging oil and energy prices due to the U.S.-led Iran conflict are already raising inflation — the Canadian CPI is highly correlated with U.S. inflation.
• U.S. trade policies are causing supply and demand shocks, leading to price hikes that are slowly being passed on to consumers in both countries.
• Ongoing geopolitical conflict, trade disruptions, and higher U.S. tariffs on certain Canadian imports are injecting significant uncertainty for Canadian companies and consumers, interrupting planning, hiring, investment, and spending decisions.
• The interest rate differential between the two central banks is now over 1.0%, which pressures input prices.
• A higher U.S. dollar is raising import prices, adding to inflationary risks.

Several broader U.S. economic conditions are also worth watching:

• U.S. data sources, under political pressure, are giving some economists reason to question whether they're offering an unbiased read of the U.S. economy.
• Immigration issues between the two countries may further diminish our labour productivity.
• Proposed U.S. taxes (section 899 of the One Big Beautiful Bill Act) on Canadian investments and companies could have a significant economic impact.
• U.S. government debt is ballooning — current interest payments now exceed the defence budget — and tariff revenue is running well below expectations.

When will fixed rates drop?

Fixed mortgage rates are steered by the Canadian bond market and (eventually) follow the movements in bond yields up or down. 5-year bond yields are the standard for setting 5-year fixed rates and are the reference in this section and blog.

Yields and fixed rates remain elevated as inflation risks rise.

Canada's 5-year bond yield is in the 3.3% range as oil prices remain elevated amid the ongoing U.S.-Iran conflict, and bond traders fret about rising long-term yields in response to both elevated inflation risks and the sheer size of U.S. debt.

Factors that could pressure yields:

• Ongoing energy supply disruptions, the longer the U.S.-Iran conflict persists
• A potential for a bounce in consumer and business spending, if energy inflation eases
• Economic heat fueled by higher Canadian crude export prices (which is having a positive impact on business growth across the economy, not just in the oil and gas sector)
• U.S. core inflation that has continued above 3% for the past year
• Canadian government stimulus in support of U.S.-trade-impacted sectors
• Ballooning U.S. and Canadian debt, though the U.S. debt spiral holds the greatest global risk

On the moderation side, possibly offsetting inflationary pressures:

• Increasing oil and consumer demand pullback resulting from months of higher energy prices
• More U.S. tariffs are threatened, which could weigh on growth recovery projections
• A soft labour market — despite three months of better numbers, the market is still in a state of excess supply

Ongoing uncertainty will continue to drive market volatility. We can all likely agree we've seen enough volatility and would like to see something in a less volatile colour.

Fixed mortgage rates won't drop substantially until yields do. Yields aren't likely to enter a sustained downward trend unless signs of deeper economic softening gain momentum and inflation pressures ease. You may see fixed rates fluctuate within a tight range for a while yet.

Lender margins remain tight, keeping rate markets in the uncomfortable 'reactionary' zone. Mortgage rate deals may emerge depending on prevailing bond-yield conditions.

It's a good time to lock in your mortgage rate if you're looking to buy a home or renew your mortgage, as fixed rate movement is likely to resemble a rollercoaster for the next while, or at least until we see some clarity on geopolitical activity and U.S. trade.

Can the U.S. economy affect rate hikes here?

Yes. The U.S. economy matters for Canadian rate decisions.

Why it matters, briefly:

• Trade and prices. Strong U.S. demand and tariffs can change import and export prices here, which feeds into Canada's inflation readings.
• Policy and capital flows. If the U.S. Federal Reserve holds or raises rates while the Bank of Canada cuts or holds lower, capital may shift toward U.S. assets, weakening the loonie and raising the cost of imports — which feeds directly into Canadian inflation.
• Market spillovers. U.S. growth, fiscal moves, or political uncertainty can change global bond yields and risk premiums, and these moves can show up in Canadian fixed mortgage rates.

Bottom line: A hotter U.S. economy, or U.S. Fed policy rate tightening, tends to push Canadian yields and rates up, while a U.S. slowdown can make it easier for the Bank of Canada to cut its benchmark interest rate.

Will Canada's economy avoid a deeper recession?

Canada's economy isn't even entertaining a recession, according to the latest numbers for the second quarter of 2026.

Consumer demand is holding its own despite certain sectors being hit by tariffs and higher energy prices, because of other sectors benefiting from oil and gas sector revenue and business growth.

Canadian government initiatives are helping to improve domestic productivity — including reducing inter-provincial trade barriers, investing in energy and production infrastructure, reviewing restrictive regulations that hinder growth, and expanding international trade opportunities. Will it be enough to outdo Trump's latest tariff threats? Only time will tell.

Worth noting is that a recession often hits Canadians hardest in the sectors most affected, and whether the country is technically in contraction or not won't matter much to those who've lost their jobs.

What would a recession mean for mortgage rates?

If economic weakness accelerates, the BoC would likely lower its policy rate — assuming job losses and spending pullbacks would place downward pressure on inflation — providing more budget relief when Canadians may need it most.

Is stagflation a possible economic outcome?

Stagflation, an entrenched state of high inflation coupled with a weak economy and high unemployment, is on everyone's radar. Our inflation pace, while elevated, remains well below the levels typically associated with stagflation and well below 2022's high of over 8%. And the unemployment rate remains below 8%.

That outlook could change if inflation runs hotter while the economy continues to weaken and lower interest rates don't support a strong enough rebound in spending.

Is mortgage activity picking up in mid-2026?

Home affordability has improved slightly in 2026 due to neutral interest rates and cooling home prices in some Canadian centres.

Here at True North Mortgage, we've seen home purchase transactions rise by about 60% over the last few months. Those needing renewals and refinances are still looking for their best deal and are coming to us to shop around on their behalf rather than going directly to their bank — especially since we can usually find a more flexible solution for a wider range of the mortgage situations we encounter.

We're also seeing substantial interest in our new alternative mortgage product, Compass Mortgage, which offers more flexible approval criteria to help homebuyers and homeowners get or keep their homes.

Dan's mortgage rate advice for 2026?

Use an expert broker to get your best rate and mortgage — if you really want to save more.

Whether rates are falling or rising, your best rate and mortgage can help you better afford your home. Many Canadians are still unaware that they don't have to stick with their bank for a mortgage, purchase, renewal, or refinance.

• Shop around. You don't have to get a mortgage with your bank — and doing so may result in paying a higher rate.
• Use an expert broker, preferably a highly trained, salaried, non-commissioned True North broker. You'll get expert, unbiased advice (in your preferred language) from a broker who puts you first.
• Hold your rate. Hold or lock in your rate with us to protect your budget from rate increases while you make home-buying or mortgage decisions.

First-time home buyers, especially, need expert advice to set them on a path to successful homeownership amid all these price pressures.

A variable rate can offer immediate savings, and short-term fixed-rate specials can be a solid choice.

A 5-year variable rate is currently lower than most fixed mortgage rates. And a shorter term, such as a 2- or 3-year fixed rate, may offer budget peace of mind, along with the ability to renew sooner than a 5-year term if you think rates will decline in that time.

If you're buying a home or looking to switch, our unique 6-month fixed Rate Relief™ product can help you bridge the gap with budget relief now, giving you time to consider a longer commitment later.

Owning a home is a tremendous source of pride in Canada. I created True North Mortgage to deliver a better mortgage experience and save clients thousands by securing their best possible rate and a more flexible mortgage for long-term savings.

Have questions about your mortgage or pre-approval? Give us a shout, anywhere you are in Canada. We have your best rate, expert advice and unbeatable service — with over 19,000 5-star reviews from our happy clients.