As 2026 approaches, Canadian mortgage holders are looking for clarity after a year of declining rates ended with a pause from the Bank of Canada. Penelope Graham, a mortgage expert with Ratehub.ca, has released her key predictions for the year ahead, outlining a landscape where variable-rate mortgages are poised to become more popular, yet many homeowners renewing their loans will still feel a financial pinch.
Variable Rates: Stability and Growing Appeal
Graham presents a mixed outlook for variable-rate mortgages. While the Bank of Canada cut its key overnight rate four times by 25 basis points in 2025, bringing it down to 2.25%, the recent decision to hold steady may set the tone for the coming year. "Surprisingly strong GDP and labour numbers … show there’s little need for the bank to heap on additional stimulus," Graham states. This suggests variable interest rates, which move in tandem with the central bank, are likely to remain stable throughout 2026.
Despite the forecast for no further cuts, variable-rate mortgages have become competitively priced. Graham highlights that the lowest available five-year variable rate sits at 3.45%, undercutting the comparable fixed rate of 3.94%. This attractive spread is expected to drive more borrowers toward variable-rate products in 2026 compared to recent years, marking a potential shift in consumer preference.
Renewal Reality: Higher Payments Loom for Many
Even with the general downtrend in rates, a significant number of homeowners facing renewal in 2026 are not out of the woods. Those with fixed-rate mortgages coming due can expect to pay approximately 26% more on average, according to Graham's analysis. She notes these borrowers will likely renew in the high three per cent range, a jump from the ultra-low rates they secured previously.
The situation is slightly better, but still challenging, for those with variable-rate mortgages initiated around 2021. These homeowners initially enjoyed rates below one per cent, but saw their costs and amortization periods rise with subsequent rate hikes. By December 2025, their rate might have adjusted to around 2.99%. Upon renewal, Graham forecasts these variable-rate holders could see their monthly payments increase by about 4%.
A Cautious Housing Market Outlook
The broader Canadian real estate market is predicted to see muted activity. Graham points out that 2025's sales struggled to gain momentum due to economic uncertainty, particularly stemming from the United States, even as interest rates fell. With the Bank of Canada expected to maintain its current stance and no rate cuts on the horizon for 2026, home sales are likely to remain tepid. Economic uncertainty is projected to persist, continuing to dampen market vitality.
In summary, 2026 is shaping up to be a year of strategic decisions for Canadian homeowners and buyers. The appeal of variable rates is growing due to their lower current costs, but the legacy of past low-rate mortgages means higher payments at renewal are a widespread reality. The overall housing market, meanwhile, awaits a stronger economic signal to reignite significant growth.
