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.

For the moment, hopes of near-term interest rate cuts are likely buried amid current inflation risks. The latest real GDP growth of 0.5% recorded in April, along with a positive print expected for May, has stopped all recession talk — and another positive month of labour news saw the unemployment rate drop again to 6.5% in June.

Trade with the U.S. is still a major concern due to its potential impact on our economic growth this year. Amid uncertain economic headwinds, Canada's resilience keeps resurfacing, even though its growth engine remains underwhelming.

The potential for rate hikes later this year, however, is still above ground. We saw some relief in the energy market when a U.S.-Iran ceasefire was declared, but renewed tensions continue to undermine global oil flow through the Strait of Hormuz and affect downstream gas refining. Instability is likely to persist, keeping inflation risk elevated and increasing the potential for it to creep through the economy.

Make no mistake: inflation is a concern. Ask anyone whether prices are getting better or worse, and the resounding answer is the latter. With the next inflation report due in a few days, we'll get another look.

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

What factors could swing the forecasts? Volatility is the name of the game, but emerging economic readings or geopolitical events could finally nudge rates in a definitive direction.

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

• Knock-on effects from months of elevated oil prices can sustain expectations of higher inflation, creating an environment in which businesses keep prices higher to recoup costs.
• Oil demand that fell substantially during the Iran conflict could resurge, creating economic heat that pressures inflation.
• U.S. inflation is above the U.S. Fed target of 2.0%, which can feed into Canadian pricing (the U.S. is still our largest trading partner).
• Broader creeping inflation could result in rising core inflation, a lagging indicator.
• 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:

• Worsening U.S. trade relations could quickly tip the scales on growth and labour and require another rate cut to support economic recovery.
• For a cut to be possible, an oversupplied labour market (aka elevated unemployment rate) would have to keep inflationary pressures in check.

What's for certain? There's no doubt that many Canadians are facing financial challenges as everyday goods and services become increasingly expensive. Many businesses are still sitting back amid layered uncertainties, waiting for signs that the volatility is drying up.

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're not high, either. Historically speaking, interest and mortgage rates today sit at about the mid-point. With both a BoC cut or a hike possible this year, at True North, we're seeing a close to 60% month-over-month uptick in home purchases, with buyers who are tired of trying to time the market instead taking advantage of rate deals and stable home prices in some Canadian centres.

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 decision (courtesy of mortgagelogic.news, as of July 15, 2026):

• 25 bps rate hike: 4% probability
• No change: 96% 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) – STILL PAUSE
  May 2026 CPI (Canadian Price Index) unexpectedly rose to 3.2% (3.0% was the call), the highest headline rate since September 2023; however, core inflation (the average of the median and trimmed measures) remained flat at 2.1%, giving the BoC room to look past the energy-inflation hit in the near-term (next reading Jul 20)
  
• LABOUR MARKET – PAUSE
  Canada's June 2026 labour market report was again positive, posting a 18K job gain, mostly in youth and private sector employment, nudging the unemployment rate down to 6.5% from last month's 6.6%; year-over-year, the market is up 88K jobs (next reading Aug 7)
  
• WAGES – PAUSE
  June's average wage growth increased to 3.3% from last month's 3.0%, but is lower overall compared to earlier in the year (next reading Aug 7)
  
• ECONOMIC GROWTH – PAUSE
  The 'recession talk' has been quieted, for now, as April 2026 real GDP improved to a 9-month-best 0.5% growth after a Q1 2026 contraction, and with May looking to eke out a 0.1% positive print (May reading on Jul 31)
  
• BOND YIELD MARKET – PAUSE
  The Canadian 5-year bond yield is holding around 3.1% following renewed Middle East tensions and Canada's June unemployment rate drop; expect energy price volatility and trade rhetoric to reflect in market ups and downs (hopefully in a tight 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 path of inflation, 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 the first few months of 2026, then rise by 0.75% to 3.0% by the end of 2026, and remain at that level through 2027, while warning that tariff‑related uncertainty may delay or reset this path.
• CIBC Economics predicts the BoC policy rate will rise by 0.75% to 3.0% by the end of 2026 and remain at that level through 2027.
• RBC expects the BoC rate to remain at 2.25% through 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% (still in the neutral range).
• 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.

Let's dive deeper into the latest economic numbers.

Why is Canada's inflation higher in May 2026?

In Canada's latest CPI (Consumer Price Index) report, headline inflation in May 2026 surpassed the expected 3.0%, rising to 3.2% (up from last month's 2.8%), the highest rate since September 2023.

Higher oil prices are mostly to blame, as gas prices in May rose by 33% — food, transportation, and gas were the only CPI components over 3.0%, while shelter costs helped to offset at 1.7%. Stripping out the volatile energy component, the remaining CPI baskets were up to 2.1% from last month's 1.8%.

Core inflation remains within the BoC's target. The average of the median and trimmed measures held at 2.1%, allowing both slack and time for energy inflation spikes to see their way out, assuming the recent oil price decline trend holds.

Several factors could keep a lid on energy inflation, including the extent to which higher prices affect consumer spending. Canada's economy is already softening amid U.S. trade disruption and uncertainty, with some experts believing the BoC will still be able to leave its policy rate unchanged in 2026.

Is Canada's labour market weakening in 2026?

After months of decline earlier this year, the labour market has improved over the warmer months, with June 2026 numbers showing 18K in job growth, mainly in youth summer employment and private-sector jobs. The unemployment rate dropped again, to 6.5% from last month's 6.6%, a level seen this past January.

Compared to last June, the market is up by 88K jobs. Wage growth rose slightly to 3.3% from last month's rate, still well below levels seen earlier in the year, when wage growth averaged around 4.0%.

Remember also that much lower immigration targets and continued outflows, which could bring population growth to near zero in 2026 and 2027, may skew the labour numbers to the positive, masking weakness. And there is still considerable uncertainty about how the U.S. trade review will be resolved, which could send labour numbers back down the slide.

Two 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.

Is Canada in a recession in 2026?

Canada had momentarily entered a technical recession with both Q4 2025 and Q1 2026 showing contraction, but April's real GDP growth of 0.5% (when 0.4% was expected) and an expected positive print for May have dispelled any recession talk for now.

April's growth, the largest monthly expansion since February 2024, though led by oil- and gas-related sectors benefiting from higher energy prices, marks yet another beat for Canadian resilience amid U.S. trade disruption.

The Bank of Canada had projected real GDP growth of 1.1% for 2026, but with the Q1 surprise contraction, that forecast may change — and still hinges on how the oil price shock and a U.S. trade review play out.

Recent government GST relief, additional stimulus for trade-impacted sectors, and infrastructure and trade initiatives may prop up Canada's economic resilience as 2026 wears on.

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 are holding steady after a slight jump.

Canada's 5-year bond yield is holding around 3.1% following Canada's positive June 2026 labour print, and amid U.S. President Trump's comments that the MOU with Iran is no longer valid, and as the two sides exchange military strikes in the region. Will this latest volatility settle quickly?

Oil prices are higher than the $72-per-barrel level they fell back to, pushing up yields and causing fixed rates to rise by about 0.10%. Look for yields to ease slightly if a resolution is soon reached.

The pressure on yields could continue through:

• Continued energy supply disruptions as the Iran conflict waxes and wanes
• A potential for a bounce in consumer and business spending, if energy inflation eases
• Fueled growth from higher Canadian crude export prices (as we saw in April GDP numbers)
• U.S. inflation that is currently sitting above 3%
• Canadian government stimulus in support of U.S.-trade-impacted sectors
• Reports of ballooning U.S. debt and the overstatement of the revenue the U.S. is collecting from tariffs

On the moderation side, possibly offsetting inflationary pressures:

• Demand pullback could continue, resulting from over four months of higher energy prices
• A negative outcome from the U.S.-Canada trade review that could impact growth projections
• A still-soft labour market (despite two months of better numbers)

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 is narrowly skirting the line between contraction and growth, and forecasts for Q2 2026 suggest another quarter of contraction may be avoided. But the economy is certainly not humming along at a pace that suggests strength.

Consumer demand is holding its own despite certain sectors being hit by tariffs and higher energy prices. Canadian initiatives are already underway 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? 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 further — 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.

However, ongoing U.S. trade and geopolitical uncertainty continues, and expectations for 2026 housing markets to improve over last year have been muted.

Here at True North Mortgage, we've seen home purchase transactions rise by about 60% over the last few months. As well, 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.

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 17,000 5-star reviews from our happy clients.