Canadian homeowners who gambled on waiting for lower interest rates are now confronting a costly reality, according to industry experts. With fixed mortgage rates quietly climbing, the window for securing pandemic-era lows has effectively closed for many borrowers.
The Cost of Waiting: From Mid-3% to Low 4%
Fixed-rate mortgages, which are tied to bond yields and broader market conditions, have been steadily increasing. Since this past fall, these rates have drifted higher, moving from a range in the mid-3 per cent bracket to now starting in the low 4 per cent range. This shift has caught some borrowers off guard after a period of declining variable rates.
Leah Zlatkin, a mortgage broker and expert with LowestRates.ca, has witnessed the trend firsthand. "Over the past few months, I've seen clients turn down fixed-rate renewal offers around 3.7 per cent because they were convinced rates would keep falling," Zlatkin explained. "Now those same borrowers are coming back and finding that the best available rates start with a four. That delay is already resulting in higher monthly payments."
A Looming Renewal Wave and Shifting Preferences
The timing of this rate creep is significant. By the end of 2026, more than one-third of Canadian homeowners are scheduled to renew their mortgages. Many will face significantly higher rates compared to the historic lows they secured during the pandemic.
While variable rates have seen more substantial drops over the past year—falling from around 7 per cent in June 2024 to slightly below 4 per cent following Bank of Canada cuts—this relief appears to be stalling. The central bank is now expected to hold its benchmark rate steady this year, with some economists even predicting a potential increase by year's end.
In contrast, fixed rates have decreased only modestly, by just over 100 basis points, with five-year terms seeing even less movement. Recent economic data that has outperformed expectations, coupled with the Bank's decision to pause rate cuts, has pushed bond yields higher, directly influencing fixed mortgage costs.
One notable shift in the market is the declining popularity of the traditional five-year fixed term. Hendrix Vachon, a principal economist at Desjardins Group, highlighted this change in a recent report. Before the pandemic, roughly 30 per cent of new financing was for terms of five years or more. However, data from the Bank of Canada shows that between 2022 and 2025, that share plummeted to just 15 per cent.
Today, the most common choice is a fixed-rate mortgage with a term between three and five years, accounting for nearly 40 per cent of all mortgages.
Expert Advice: Predictability Over Perfection
Zlatkin cautions that because fixed rates are dictated by market conditions, waiting can easily backfire, leading to higher costs rather than savings. She emphasizes that even a small rate increase can translate into significantly higher monthly payments, especially for those with large mortgage balances.
Her advice for borrowers is to prioritize predictability. "Homeowners who value predictable payments shouldn't be waiting for a perfect moment," she stated. "In this environment, waiting can mean paying more while gaining very little in return."
For those considering their options, Zlatkin suggests that choosing a shorter-term fixed mortgage can be a strategic compromise, allowing borrowers to lock in today's rates while maintaining flexibility to adjust if market conditions improve in a few years.
Prospective homebuyers are also urged to take note. While the current market may favor buyers in negotiations, timing mortgage rate locks remains a critical component of the financial equation. Securing a better purchase price can help offset higher borrowing costs, but delaying a rate decision can quickly erase those gains.
The broader landscape underscores a period of adjustment for Canada's housing market. As illustrated by a Royal Bank of Canada chart, pre-construction condo sales in Toronto for 2025 were down a staggering 90 per cent from the nine-year average prior to 2024, signaling deep caution among investors and buyers navigating this new era of higher rates.
