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.

"A rate cut isn't in view, but a rate hike is."

The Canadian economy is doing better recently, which doesn't support a rate cut. Despite just about every economist saying it won't be repeated, the second quarter's 3.3% annualized growth result puts Canada in a stronger position to weather Trump's recent tariffs and trade threats, quashing calls for a rate cut ahead of weakening that may lie ahead.

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. If this trade situation continues, Canada's resilience on a larger scale (many businesses would be impacted) is still uncertain.

Higher energy prices pose a risk, but they're also cooling demand and prices in some 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 has been contained.

Government debt (especially in the U.S) is adding to inflationary pressures. U.S. and Canadian debt has surged since the pandemic — current U.S. interest costs in the first quarter of 2026 consumed 21% of every government revenue dollar, with Canada's consuming about 9%, up from about 7% in 2019. Some days, yields don't even react to good economic news, as bond traders hedge for inflation risk and the effect that potential interest rate hikes could have on future bond prices and global debt.

The bottom line? The Bank of Canada is still likely to hold its rate through 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.

How will the BoC lean on October 28?

"Inflation risks mean a BoC rate hike is back on the radar, though it will still likely hold this fall if core inflation remains steady."

Rate market odds (courtesy of mortgagelogic.news, as of September 2, 2026):

• 25 bps rate hike: 29% probability
• No change: 71% probability

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

Dan's rate prediction for the rest of 2026 and early 2027 — will prime rates go up?

"Through to Q1 2027, I see about an 80% chance that the BoC policy rate and bank prime rates will hold, a 15% chance of a hike, and a 5% chance of a cut."

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) – 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 – PAUSE
  June 2026 real GDP came in at 0.3% growth, rounding out Q2 at 0.9% growth, for 3.3% annualized growth, the fastest quarterly pace since 2023, led by the oil & gas sector. But let's not get too excited, as this pace isn't expected to continue, even without the escalated trade war thrown in (July reading on Sep 29)
  
• BOND YIELD MARKET – SHAKY PAUSE
  The Canadian 5-year bond yield is up around 3.4% as inflation risk (higher energy prices + government debt + potential for more supply-chain disruption) ranks higher than trade risk; 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.

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.

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 3.4% following the Bank of Canada's expected rate hold, while oil prices rise amid an escalating U.S.-Iran conflict and bond traders fret about higher long-term yields amid elevated inflation risks and the sheer size of U.S. and global debt.

5-year fixed rates may rise if this yield trend holds.

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.

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.

Will Canada's growth weaken in 2026?

Well, Q2 2026 GDP numbers are looking up — all the way to a 3.3% annualized growth pace, the fastest expansion since 2023. However, experts don't expect this pace to continue, with the World Cup bump over and the potential for the conditions in the Strait of Hormuz to 'normalize.'

Despite the happier GDP numbers, underlying weakness remains, and Q2's stronger growth is likely to smooth down heading into the fall as higher prices erode spending power. Not to mention the U.S. trade war escalation, with President Trump's threat to add even more tariffs in 2027 that could further erode Canada's growth progress.

The Bank of Canada projected real GDP growth of 1.1% for 2026, and Q2 growth shot well above that. But even original growth forecasts may now be revised down, 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, 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.

Amid the uncertainty, the Bank of Canada is likely to hold its policy rate, as it seeks concrete, sustained signs 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.

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 recession?

Canada's economy isn't even entertaining 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 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 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 2026?

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

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 Q2 2026.

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.