What to expect for mortgage rates in 2026 to 2030

What's Next for Rates? Dan's Take

Dan's watching signs that could point to a Bank of Canada rate cut, a hold, or a shift in tone that signals the start of another hiking cycle. The next rate decision is coming up — 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 in anticipation of changes to the prime rate.

"A rate cut isn't in the cards, and rate hold talk is over — rate hikes are next in line."

Global bond markets warn that inflation risks are building. At 3%, August headline inflation is already knocking on the Bank of Canada's upper limit. Core inflation in August remained steady at 2%, but bond markets don't seem to believe it will stay that way, with long-term government bond yields in many countries at multi-year highs.

Headline and core inflation look backward. Long-term bond yields reflect what large pools of capital believe about the future. The 10-year Treasury yield (U.S. bond) just reached its highest level in 24 years, and 30-year bond yields have risen sharply as traders price in oil and gas costs spreading into broader inflation, heavy government borrowing, and a surge in corporate AI debt.

It's not just the U.S. — the U.K., Germany, France and Japan are also hitting their highest 10-year yield levels in 15 to 30 years. Canada's 10-year yield has risen less dramatically (to its highest level since 2023), but Canada's markets and inflation aren't walled off from those global market pressures, with U.S. spillover pushing up our fixed mortgage rates and adding to inflation risks here.

However, if central banks, including the BoC, raise their policy rates by half a percentage point before year-end or into early 2027, calmer markets could prevail to help flatten the long-term yield curve. That 'relief' could moderate the Canada 5-year bond yield, giving fixed mortgage rates room to dip slightly and easing the need for more BoC rate hikes into the first quarter of 2027.

U.S.-Canada trade disruption is adding to inflation risk and government debt. U.S. tariffs are raising costs for Canadian and U.S. businesses, and support for hard-hit sectors adds to government borrowing. In the U.S., a Supreme Court ruling cut tariff revenue well below projections, adding roughly US$200 billion to the country's annual deficit.

The trade war flipside is slower spending and growth, which could temper inflation in Canada, though maybe not enough in the short term to outweigh expectations of higher inflation — especially if elevated oil prices are sustained.

Could a Middle East resolution quickly reduce energy prices and inflation risks? It likely could. However, despite continual expectations that a lasting cessation is just around the corner, rumours suggest the global oil supply restrictions could run past U.S. midterm elections, or longer. Plus, with the oil price shock timeline stretching out from last February, the knock-on effects and input-price impact could still be felt for months.

How will the BoC lean on October 28 and December 9?

"The BoC is likely to move its rate higher sooner rather than later to get ahead of the inflation risk curve."

The magic number in calling the rate-decision odds is usually 60%:

Rate market odds for October 28:

• 25 bps rate hike: 39% probability
• No change: 61% probability

Rate market odds for December 9:

• 25 bps rate hike: 100% probability
• No change: 0% probability

Source: As of October 1, 2026, mortgagelogic.news

Dan's rate prediction for the rest of 2026 and early 2027 — how high could prime rates go?

"With the Middle East conflict keeping energy prices higher for longer, and global debt levels adding pressure, the uncertainty is pointing rates in one direction — up. How many hikes may be needed is still unclear."

I agree with market expectations that the BoC will likely need to raise rates by year-end, despite U.S. trade war risk to Canada's economic growth. We're seeing how U.S. trade and global policies, amplified by bond markets, are creating stagflation risk in which a central bank has to raise interest rates even as its economy slows.

Will a rate hike or two be enough to stabilize markets and inflation pressures? It's too soon to say whether more rate hikes would be needed into 2027, and whether the U.S. midterm elections could alter the rate course.

Keep in mind that predicting interest rates is a 50/50 game, but if we don't attempt to forecast, we can't help prepare or protect our mortgage clients.

Stay tuned!

Cut, pause, or hike? Latest key readings predict where rates may go next.

Here's a snapshot of key economic factors and what they currently signal for future interest and mortgage rate moves.

Want a deeper dive into the factors? Read more here

• INFLATION (MOST IMPORTANT FACTOR) – HIKE, BASED ON FORWARD INFLATION CURVE
  August 2026 CPI (Canadian Price Index) remained flat, with headline inflation still at 3.0% and core inflation (the average of median and trimmed measures) at 2.0%; groceries rose less than headline for the first time since 2024, while gas rose 23% y/y; on the surface, the BoC has room to look past inflation risks — however, the bond market is demanding central banks move rates to account for forward-looking inflation impact (next reading Oct 19)
  
• LABOUR MARKET – PAUSE
  Canada's August 2026 labour market report saw a jobs loss of 42K (a gain of 15K had been expected), and the unemployment rate remained unchanged at 6.4% due to slightly higher participation; weakness was concentrated in services, likely as the World Cup surge dissipated and a more representative labour picture re-emerged (next reading Oct 9)
  
• WAGES – PAUSE
  June's average wage growth fell again to 2.0% (from last month's 2.8%), which is the lowest annual rate in 4 years, and helps push against rate hike worries; plus, lower wage pressures can encourage businesses to hire and invest, a helpful factor amid U.S. trade worries (next reading Oct 9)
  
• ECONOMIC GROWTH – PAUSE
  July 2026 real GDP came in flat after June's 0.4% growth (revised from 0.3%), as momentum slowed across the goods and services sectors, and declined in the goods-producing sector; August GDP is tracking at 0.2% growth, for a Q3 2026 projected ~0.5% and 2.0% annualized growth (August reading on Oct 30)
  
• BOND YIELD MARKET – HIKE, BASED ON ESCALATING INFLATION RISKS
  The Canadian 5-year bond yield is up to 3.6% as crude prices continue at elevated levels; markets are ranking forward-looking inflation risk (higher energy prices + government debt + supply-chain disruption) above U.S. trade risk to Canada's growth

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 (like long-term bond yields) can help the BoC assess inflation's path (cooling vs persistent vs dare we say 'transitory') and whether its policy rate should decline, rise, or hold.

For example, rising unemployment and slow GDP growth may cool inflation and allow 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 forecasts from 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 2.50% by the end of 2026, and again to 3.0% by the end of 2027, while warning that economic 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 rise to 2.50% by the end of 2026, 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 Q3 2027 to 2.5% and another hike in Q4 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 some may not include recent bond market developments that could force a BoC rate hike sooner.

Also, most economic forecasts assume an eventual favourable trade outcome; trade uncertainty and higher energy prices from the Iran conflict are wild cards that could affect economic and interest rate paths.

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 currently sits at the low end of that range. Economic conditions may prompt an adjustment to the neutral rate range, rising or lowering depending on several factors that indicate a rate level supporting a healthy economy.

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.

Where are fixed rates going?

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 up to 3.6% as oil prices remain elevated. Sustained higher energy prices are escalating inflationary risks globally, putting government spending and debt in the bond market spotlight and pressuring central banks to raise short-term rates (policy rates).

Fixed rates have risen about 0.45% since about mid-August as bond yields rose, and remain under pressure as lenders reprice margins.

Factors pressuring yields:

• Spiking long-term yields (e.g. 10- and 30-year bonds) are forcing short-term yields (e.g. 2-year, 5-year) higher to compensate
• Higher energy prices for months
• Tarifflation from escalating trade tariffs on both sides of the border
• U.S. headline 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 a U.S. debt spiral holds the greatest global risk
• Wider gap between the Canadian and U.S. dollar, which makes imports more costly

On the moderation side, possibly offsetting inflationary pressures:

• More U.S. tariffs are threatened, which could weigh significantly on growth projections
• Increasing oil and consumer demand pullback resulting from months of higher energy prices
• A soft Canadian labour market — despite three months of better numbers mid-year, the market is still in a state of excess supply, as evidenced by August numbers
• As a major oil exporter, higher oil prices support the loonie, making imports cheaper

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 a mortgage rate hold 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 clarity on geopolitical activity and U.S. trade.

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

Is Canada's inflation higher in August 2026?

Canada's latest CPI (Consumer Price Index) report showed headline and core inflation in August 2026 not only remained flat, but still showed little evidence of broader economic impact from energy inflation.

Grocery prices rose at the slowest annual pace since 2024, by 2.8%, also the first time this measure has come in below headline since then. Gas rose about 23% year over year, by far the main contributor to the 3.0% headline average. Stripping out energy, inflation's pace declines to 2.3%, well within the Bank of Canada's tolerance.

Core inflation remains within the BoC's target. But backwards-looking inflation readings may be temporarily sidelined as bond market concerns grow. The August average of the median and trimmed measures remained at 2.0% (smack in the middle of the BoC's range of 1-3%), but long-term bond yields have risen sharply on energy inflation risk to global debt levels, which is pushing that forward curve back onto central banks to raise their short-term (policy) rates to compensate.

So instead of a nail-biter inflation reading on Oct. 19 ahead of the BoC's October rate decision, the bond market may supersede it to push the Bank of Canada rate up this year.

Is Canada's labour market recovering in 2026?

The party's over. Literally, the World Cup ended, and the August labour market is back to displaying this economic factor's true colours — with a 42K job loss when at least 15K had been expected. You may have guessed the labour decline was mainly led by the services sector, which likely returned to more normal staffing levels after soccer-crazed crowds dissipated.

The unemployment rate remained at 6.4%, with participation rising slightly to offset the jobs decline.

Interestingly, August wage growth dipped again to 2.0% from last month's 2.8%. Easing wage pressures encourage businesses to hire and invest. This metric improvement likely reflects lower wage expectations driven by trade uncertainty and higher energy prices, but reduced wage costs also encourage businesses to hire (if demand is there) and invest amid the trouble.

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 greater weakness and excess supply.

This labour reading should help cool Bank of Canada rate-hike talk if the next couple of CPI core readings remain within the BoC's target range.

Will Canada's growth weaken in 2026?

The GDP (Gross Domestic Product) growth for Q3 is looking more subdued compared to Canada's Q2 2026 GDP rebound that registered a 3.3% annualized growth pace, the fastest expansion since 2023. July real GDP came in flat, with August projected to post 0.2% growth, and the quarter a possible 2.0% annualized pace — still respectable, given what's being thrown at our economy.

But the fourth quarter is expected to take a growth hit. The U.S. trade war escalation is likely to further erode Canada's growth recovery this year, with the "bite from the new U.S. duties to meaningfully hit in September and take full effect in the fourth quarter" (The Canadian Press, September 29, 2026). That assumes these trade conditions continue and oil prices remain elevated for longer.

Earlier in the year, the Bank of Canada projected 2026 GDP growth of 1.1% (year-over-year). But growth forecasts are being revised downward, as an ongoing energy price shock and new U.S. tariffs and threats play out.

So far in 2026, Canada's economic resilience continues to hold ground overall, with recent government GST relief, additional stimulus for trade-impacted sectors, and infrastructure and trade initiatives helping to keep the GDP in 'real' territory in the second quarter (so far).

Amid uncertainty and a potential economic slowdown, inflation risk may still pressure the Bank of Canada to raise rates in the near term.

What are Canada's GDP numbers for 2026?

Sources: Bank of Canada Monetary Policy; StatsCan, National Bank, RBC Economics. Note: The quarterly change is the growth rate in real GDP from one quarter to the next. The annualized change is that quarterly rate compounded over a full 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 energy prices have risen, Canadian households have seen fixed rates return to last year's levels, while variable rates remain lower — and home buyers and owners are choosing this option most often to purchase or renew, prioritizing immediate rate savings over the risk of change. 

With potential prime rate increases coming, however, the variable-rate choice is likely to lose ground to fixed rates amid the economic volatility. 

If you're looking to buy, renew, or refinance — lock in a rate hold now, or talk to your expert broker about the next mortgage move that makes sense for you.

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.

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 bond 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 recession?

Canada's economy isn't entering a recession, according to second-quarter 2026 growth numbers.

Consumer demand is holding up despite tariffs and higher energy prices hitting certain sectors, as other sectors benefit from oil and gas 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.

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 (or high inflation expectations) 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%. The unemployment rate also remains below 8%.

That outlook could change if inflation, or market expectations of inflation, run hotter while the economy continues to weaken.

Is mortgage activity picking up in 2026?

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

As the potential for prime rate increases has hovered over rate forecasts this year because of elevated energy prices, rate uncertainty has nudged more homebuyers off the sidelines, with interest and mortgage rates still near the historical midpoint.

In the first half of 2026, here 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 Q2 2026.

However, mortgage activity may react in two ways to the potential for rate hikes in the last few months of 2026 — either more homebuyers and owners will try to get in ahead of higher rates, or many will go back to the sidelines on their mortgage decisions, waiting for the volatility to ease or for a clearer rate path to emerge.

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 afford your home. Many Canadians don't realize 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 can mean you'll pay 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. Protect your budget from rate increases while you make home-buying or mortgage decisions.

First-time home buyers, especially, can benefit from expert advice that helps set you on the path to successful homeownership amid all these price pressures.

With prime rate hikes forecast, more will choose a fixed rate.

A 5-year variable rate is currently lower than most fixed mortgage rates, and has been the more popular choice over the past few months.

But with a couple of prime rate hikes forecast before year-end, that rate gap will quickly close, likely making a fixed-rate term the preferred mortgage choice during economic volatility. And the standard 5-year fixed may not reign supreme if home buyers and owners don't want to wait that long to see how markets settle, and instead go with a 2- or 3-year term (with a potential to renew into lower rates sooner),

If the prime rate hikes come through in the next few months, it may calm bond markets, and we may see fixed rates moderate towards year-end. If you currently have a variable-rate mortgage, that may be the time to switch to a fixed rate (most lenders allow this change mid-term, penalty-free) if you feel prime rates will rise further next year.

If you're buying a home or looking to switch, our unique 6-month fixed Rate Relief™ product can help you bridge the rate-uncertainty 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.