Canadian Mortgage Rate Forecast to 2028

The Bank of Canada holds the line, but the cost of borrowing is poised to climb. Here is what buyers and owners should be doing now.

HIGHLIGHTS

• The pause is real, and the cuts are finished. On current evidence, the Bank of Canada will almost certainly leave its policy rate at 2.25 per cent on June 10. The brisk easing of 2025 has run its course. The Bank has settled into a watchful posture, and when it next moves, the smart money says it will be up rather than down.

• A geopolitical jolt to energy. The war in Iran has effectively closed most of the Strait of Hormuz, stripping roughly 10 per cent of global oil supply out of the market. West Texas Intermediate has surged from about US$75 to nearly US$100 a barrel. That kind of supply shock lifts headline inflation while it drags on growth, a stagflationary squeeze that leaves the central bank with little room to cut.

• The case for raising. Scotiabank now expects three increases in the second half of 2026. TD points out that markets have already priced in at least one. Even if the Bank stands pat through the year, what National Bank calls "inflation-related anxiety" could force its hand in early 2027.

• The case for cutting? The economy contracted in the fourth quarter of 2025 and shed roughly 100,000 jobs early this year. Soft demand is a real argument against tightening. But the Bank answers first to its inflation mandate, and energy prices are pulling that number the wrong way.

• What it means for mortgages. Fixed rates have already climbed 0.35% to 0.40% points since the conflict began, and they are likely to hold firm or edge higher. Variable rates should stay put for a few more weeks before beginning to rise late in 2026. Barring a deep recession, a meaningful drop in mortgage rates is simply not in the cards.

Bank of Canada Overnight Rate

After a run of cuts through 2025, the Bank of Canada has stepped back to take stock. With the policy rate at 2.25 per cent, attention has shifted to how quickly, and how convincingly, inflation can find its way back to the 2 per cent target against an oil shock and a softening economy. Unlike 2022, the economy today carries genuine slack. Unemployment is rising, population growth has cooled, and final domestic demand is weak. That gives the Bank latitude to look past a temporary inflation spike. Should higher energy costs prove sticky and seep into core measures, however, the next move will be a hike. For Canadian borrowers, the era of falling rates has ended. The question is no longer whether rates will rise, but when, and by how much.

This forecast draws on the latest economic data and the published projections of major banks and credit unions, among them Desjardins, Scotiabank, National Bank, RBC and TD.

The Canada-China Trade Context

Following Prime Minister Mark Carney's four-day visit to Beijing, Canada has entered a new strategic partnership with China, a clear signal of intent to diversify trade away from its heavy reliance on the United States. In January 2026, the two countries reached a preliminary agreement to ease certain restrictions, including lower Canadian tariffs on a quota of Chinese electric vehicles and reduced Chinese tariffs on key Canadian agricultural exports such as canola, lobster and peas.

The strategy is meant to cushion Canada against American trade volatility while demonstrating that Canadian exporters have alternatives to the U.S. market. At the same time, Ottawa is pursuing investment deals with partners such as the United Arab Emirates and weighing a major defence procurement from Sweden, decisions that could reshape trade and investment flows even as they create fresh friction with Washington ahead of the USMCA renegotiations.

These developments matter because Canada's dependence on exports to the United States has left it exposed to tariffs wielded as instruments of economic pressure. By broadening its trade relationships, Canada can chart its own course and set its own terms, ensuring that no single partner holds undue sway.

The Bank of Canada Rate Forecast: A Pause for Assessment

The Bank's posture is one of deliberate caution. The rapid easing of 2025 is over, and at its coming meeting it will almost certainly hold at 2.25 per cent. The central bank is in wait-and-see mode, watching how the oil shock plays out across both inflation and growth.

Its first task is to keep inflation expectations anchored. With energy prices sharply higher and trade uncertainty still elevated, the Bank is in no mood to hint at future cuts. Indeed, several leading forecasters now expect the next move to be a hike. Scotiabank anticipates three increases in the second half of 2026. TD notes that markets have priced in at least one. National Bank, while expecting no move in 2026, concedes that "inflation-related anxiety" could force tightening in early 2027. RBC sees the policy rate reaching 3.25 per cent by the fourth quarter of 2027, and Scotiabank pencils in 3 per cent, while most of the remaining forecasters look for two hikes to 2.75 per cent beginning in 2027.

The Bank has made plain that if inflation pressures reaccelerate, it stands ready to raise rates again even with growth subdued. Taken together, the balance of risks around the policy rate now tilts toward higher rates, not lower. The consensus, in short, is that rates are headed up.

5-year Government Bonds

The path of fixed mortgage rates is closely bound to the yield on the five-year Government of Canada bond. Those yields capture the market's expectations for growth, inflation and the central bank's next steps.

Since the Iran conflict began, five-year yields have risen by 0.35 to 0.40 percentage points. Even after a two-week ceasefire in early April, they remain well above pre-conflict levels. Most forecasts see yields holding in a range of 3.0 to 3.5 per cent through 2026, with an upward bias. A prolonged conflict, or a fresh escalation, could drive yields toward 3.75 per cent or higher and lift five-year fixed mortgage rates directly. A sharp downside surprise on inflation or an outright recession could pull yields lower, but that is not the base case.

Sources

To build this analysis, we have surveyed the most prominent Canadian banks and their published forecasts.

• BMO Bank of Montreal

• C1 Central1

• CIBC

• Desjardins

• National Bank of Canada

• RBC Royal Bank

• Scotiabank

• TD Bank

Current Mortgage Rates in Canada

Recent Mortgage Rate Trends in Canada

Impact of Rates on Homebuyer Budgets

Mortgage Rate Predictions Through 2028

Will the 5 year fixed rate fall further?

That is unlikely on the current outlook. The typical five-year fixed mortgage rate has already fallen a long way from its 2023 and 2024 peak, but it is not projected to drop much further without a major negative shock to the economy. Bond markets have largely absorbed the Bank's pause and the oil shock. A persistent or renewed inflation surprise would push fixed rates higher, while only a sharp downturn in growth and employment would move them materially lower. Neither is the base case.

How much further will variable rates drop?

On what we know today, very little. Variable mortgage rates track the Bank of Canada's policy rate closely. With the Bank on hold and inflation risks tilted upward, it will not cut again short of a deep recession. The risk profile has flipped. Further cuts are now a remote prospect, while rate hikes are the more probable outcome for 2026 and 2027.

Try our mortgage offer comparison tool to calculate the dollar difference (not percent) between two offers. Find out how much cash you’ll save with a lower rate and the potential fees that come with different choices.

Fixed vs. Variable: Which is better now?

• The case for fixed. A five-year fixed rate buys predictability at a moment of unusual uncertainty. It shields you from future increases over a meaningful horizon and makes budgeting straightforward. With fixed rates already higher but still below where they could land if the Bank hikes repeatedly, locking in today's rate is a prudent move for anyone who values certainty.

• The case for variable. A variable rate typically starts lower, currently about 0.50 percentage points below fixed. The trade-off is accepting the risk that payments rise if inflation lingers and the Bank tightens. This suits borrowers with strong cash flow and room to manoeuvre. Most analysts, however, believe the policy rate is near the bottom of the cycle. Absent a recession, variable rates are likely to stay flat rather than fall, and if they do rise, the gap with fixed rates will close in a hurry. Two hikes would push the variable rate above the five-year fixed rate you could lock in today.

• A strategic middle ground. A three-year fixed term remains an appealing compromise. It offers medium-term stability while keeping you closer to the point at which the rate path comes into clearer focus. By a 2029 renewal, there should be far better visibility into how the Middle East conflict, trade policy and economic growth have unfolded.

Pros and cons of a 5-year fixed-rate mortgage

• The case for fixed. A five-year fixed rate buys predictability at a moment of unusual uncertainty. It shields you from future increases over a meaningful horizon and makes budgeting straightforward. With fixed rates already higher but still below where they could land if the Bank hikes repeatedly, locking in today's rate is a prudent move for anyone who values certainty.

• The case for variable. A variable rate typically starts lower, currently about 0.50 percentage points below fixed. The trade-off is accepting the risk that payments rise if inflation lingers and the Bank tightens. This suits borrowers with strong cash flow and room to manoeuvre. Most analysts, however, believe the policy rate is near the bottom of the cycle. Absent a recession, variable rates are likely to stay flat rather than fall, and if they do rise, the gap with fixed rates will close in a hurry. Two hikes would push the variable rate above the five-year fixed rate you could lock in today.

• A strategic middle ground. A three-year fixed term remains an appealing compromise. It offers medium-term stability while keeping you closer to the point at which the rate path comes into clearer focus. By a 2029 renewal, there should be far better visibility into how the Middle East conflict, trade policy and economic growth have unfolded.

Read: Mortgage Cancellation Fees and Penalties

Pros and cons of a variable rate mortgage

• Lower opening rate. Variable rates usually start below fixed rates, which can save money up front.

• Payments ease when rates fall. If the Bank lowers its policy rate, your interest costs, and often your payment, will fall with it.

• A gentler penalty to break. Penalties for breaking a variable-rate mortgage are typically capped at three months' interest, often far less than the IRD penalty on a fixed term.

• Payment uncertainty. With an adjustable-rate mortgage, your monthly payment can rise whenever the Bank hikes. With a standard variable-rate mortgage, the payment may hold steady, but a larger share goes to interest, stretching out your amortization. Make sure your budget has the flexibility to absorb higher costs.

• Exposure to inflation. Your borrowing cost is tied directly to the central bank's response to inflation. Persistent inflation means higher rates and higher payments. The settled low-inflation years of 2010 to 2020 are behind us.

How to Get the Best Mortgage Rate

1. Start early and use a broker: Reach out to an accredited mortgage broker roughly 120 days before your closing or renewal. Brokers have access to many lenders and can negotiate on your behalf. If your current lender senses you are shopping around, it will often sharpen its offer to keep you.

2. Negotiate your discount: On variable rates, the posted "prime minus" discount is frequently negotiable. Do not settle for the first number. Be aware, too, that not every bank ties its variable-rate mortgages to the Bank of Canada's prime rate. Some, including TD Bank, use their own internal prime rate, which they control and which often sits higher.

3. Consider more than the rate: The interest rate matters, but so do the terms of the contract, among them prepayment privileges, portability and how penalties are calculated, particularly on fixed terms.

Further Reading: Our mortgage renewal guide that will help you navigate the process.

Is it a better time to buy or sell a home?

The higher-rate climate has cooled many Canadian markets and all but ended the bidding wars that defined the earlier part of the decade.

Advice for Homebuyers

Your purchasing power is set by today's rates, not by the cheap-money days of 2020. Be honest about your budget and secure a solid pre-approval to hold a rate while you shop. Concentrate on homes you can comfortably carry under the stress test rather than stretching to the very limit.

Bear in mind that the bank will qualify you for an amount it believes will keep you out of bankruptcy, not for a payment you will find comfortable. Lenders will let mortgage payments consume close to 40 percent of your income. With another 40 percent or so going to taxes, that leaves roughly 20 percent of your pre-tax earnings for food, transportation, entertainment, daycare and the occasional holiday. Borrowing to the maximum can leave you house-rich and life-poor.

Advice for Home Sellers:

The days of list it and watch it sell are gone. Pricing your home correctly from the outset is now essential to drawing serious buyers. Work with an agent who understands how today's financing costs are shaping demand in your neighbourhood. Well-presented, fairly priced homes are still moving. Overpriced ones are sitting.

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Canadian Real Estate Forecasts

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