Will Mortgage Rates Drop Further in 2026? Expert Forecast

After years of sharp interest rate increases, Canadian homeowners and buyers are watching 2026 closely. The big question on everyone’s mind is simple: will mortgage rates drop further in 2026, or have we already seen the bottom?

This expert forecast breaks down where mortgage rates are likely headed, what could trigger further drops, and how borrowers should prepare.

Where Mortgage Rates Stand in Early 2026

Entering 2026, mortgage rates have eased from their recent highs but remain well above the ultra-low levels Canadians enjoyed during the pandemic. The Bank of Canada has signaled a cautious approach, focusing on controlling inflation while avoiding unnecessary economic strain.

Most lenders are pricing in small, gradual rate adjustments rather than dramatic cuts, keeping borrowers in a wait-and-see environment.

What Could Cause Mortgage Rates to Drop Further?

1. Sustained Inflation Control

If inflation continues to remain near the Bank of Canada’s 2% target, further rate reductions become more likely. Stable prices give policymakers confidence to ease borrowing costs.

2. Slower Economic Growth

A noticeable slowdown in job creation or consumer spending could prompt the Bank of Canada to cut rates to support the economy.

3. Falling Bond Yields

Fixed mortgage rates closely track Government of Canada bond yields. If global investors seek safer assets, bond yields may fall—bringing fixed rates down with them.

4. Increased Lending Competition

As more lenders compete for mortgage business in 2026, some may reduce rates or offer incentives, even if central bank policy remains steady.

Why Rates May Not Fall Much Further

Despite optimism, several factors could limit further rate drops:

• Persistent housing demand in major cities

• Wage growth adding inflation pressure

• Global geopolitical and economic uncertainty

• The Bank of Canada’s desire to avoid reigniting inflation

Experts widely agree that a return to sub-2% mortgage rates is extremely unlikely in the foreseeable future.

Fixed vs Variable Mortgages in a Falling-Rate Environment

Fixed-Rate Mortgages

Fixed rates provide certainty and protection if inflation resurfaces. Many borrowers in 2026 are choosing shorter fixed terms (2–3 years) to stay flexible.

Variable-Rate Mortgages

Variable mortgages may benefit more directly from additional rate cuts, but they still carry short-term risk if economic conditions change suddenly.

Choosing between fixed and variable depends on your risk tolerance, income stability, and long-term plans.

What Borrowers Should Do Now

Don’t Try to Time the Market

Waiting for the “perfect” rate often backfires. Locking in a competitive rate when it fits your budget is usually the smarter move.

Prepare for Mortgage Renewals

2026 is a major renewal year for Canadians. Comparing lenders and negotiating terms can result in significant savings.

Strengthen Your Application

Improving credit scores, reducing debt, and increasing income documentation can help you secure better rates—regardless of market direction.

Expert Forecast for 2026

Most experts expect modest declines or extended rate stability, not sharp drops. Borrowers should plan for a stable but cautious lending environment, where preparation matters more than speculation.

The smartest borrowers in 2026 won’t chase headlines—they’ll focus on affordability, flexibility, and long-term financial health.

Final Thoughts

Mortgage rates may edge slightly lower in 2026, but dramatic declines are unlikely. Success this year depends less on predicting rate movements and more on making informed, well-timed decisions.

Consulting a mortgage professional and reviewing multiple options remains one of the best strategies in an uncertain rate environment.