Some Canadians are hoping for another Bank of Canada rate cut before the end of 2026, but this is something the current forecasts do not support.

But that does not mean the outlook is settled. Canada is dealing with several issues that could impact mortgage rates. President Trump’s proposed 50% tariffs on Canadian goods have been temporarily paused while negotiations continue, while the Iran conflict and disruption around the Strait of Hormuz are keeping oil prices and inflation risks elevated.

Those forces can pull mortgage rates in different directions. Tariffs could weaken Canadian growth and reduce pressure on the Bank of Canada to raise rates. Higher energy costs could do the opposite. At the same time, fixed mortgage rates can move with bond yields even when the BoC leaves its overnight rate unchanged.

 

The Current Big Six Forecasts

As of August 19, 2026, the Bank of Canada’s overnight rate is 2.25%. This is what banks use to set their prime rate, which remains at 4.45%. Most big six bank economists expect it to remain there through year-end, although Scotiabank is taking a more hawkish view, forecasting a hike of 0.5% in Q4 2026. 

But remember, forecasts are just educated predictions reflecting the views of bank economists. Forecasts are useful for planning, but they are not crystal balls. If they were, every economist would be living on a private beach somewhere. 

 

Understanding the Different Rates

With so many different types of rates out there, many people get confused. For example, the BoC rate is 2.25%… but this doesn’t mean mortgage rates are anywhere close to that. Let’s take a look at the differences and how they relate to one another. 

 

The Bank of Canada overnight rate

This is the Bank of Canada’s key policy rate. It influences short-term borrowing costs throughout the economy and is reviewed on eight scheduled announcement dates each year.

The Bank’s next scheduled rate announcements in 2026 are:

  • September 2
  • October 28
  • December 9

The Bank of Canada overnight rate is currently 2.25%. The overnight rate does not directly determine the rate on every mortgage in Canada. While fixed mortgage rates will follow a similar path to the BoC rate over time, they can move independently on a short-term basis. For example, a hike to the BoC rate does not mean fixed rates will increase with them. They could remain unchanged, or even move in the opposite direction. More on this below. 

 

Prime rate

The prime rate is the rate commercial banks use as a reference for variable rate loans, including car financing, mortgages and HELOCs (Home Equity Line of Credit). When the overnight rate moves, the banks will move their prime rates in tandem with it.

But this is never a 100% guarantee. It’s up to the banks if they want to match the move… and they do the vast majority of the time. However, it’s always their call. Back in the first half of 2015, we saw two 0.25% cuts from the Bank of Canada. But the banks only cut their prime rates by 0.15%… led by TD in both cases. The other banks then followed. Credit unions and monoline lenders then followed the banks, as they always do. 

The prime rate is currently sitting at 4.45%.

 

Variable mortgage rates

A variable rate mortgage is priced as prime rate plus or minus a lender-specific discount.

For example, a mortgage could be priced at prime minus a certain percentage. The actual discount can vary from lender to lender, as well as other factors specific to each mortgage application.

If the Bank of Canada hikes by 0.25%, prime rate would generally rise by a similar amount… as would your variable rate. 

That is the risk you accept with a variable rate mortgage. More flexibility and potential savings if rates fall, but more payment or interest risk if rates rise.

 

Fixed mortgage rates

Fixed mortgage rates work differently.

They are influenced heavily by Government of Canada bond yields, along with other factors such as lender funding costs, competition and risk premiums (either real or perceived). Bond yields respond to expectations for inflation, economic growth, government borrowing and global interest rates.

That means a fixed mortgage rate can rise or fall independently of a Bank of Canada announcement.

The Bank can hold the overnight rate at 2.25% while fixed rates rise because bond yields are moving higher. The reverse can also happen. The Bank can hold while fixed rates decline if bond yields fall and lenders compete more aggressively.

3D Canadian mortgage illustration comparing variable rates linked to prime and fixed rates influenced by bond yields, with Toronto skyline and PMT Mortgage branding

This is why watching only the next Bank of Canada announcement is incomplete. For fixed-rate borrowers, the bond market may be more important than the Bank of Canada rate decision. 

 

Upward Pressure on Fixed Mortgage Rates

Based on current forecasts, the Bank of Canada is expected to keep the overnight rate at 2.25% for the remainder of 2026. Five of the six big banks agree with this.

But as mentioned above, fixed mortgage rates can change based on bond yields, which have been trending upward since late June. At that time, the lowest 5-year fixed rate was as low as 3.84% for some insured purchases or as low as 3.89% for some uninsured, depending on your situation.

It has since risen by 0.20% to 4.09%. If the bond yields continue to rise, then additional increases to fixed rates can be expected. 

The good news is that the lowest 3-year fixed rate for an insured mortgage is still only 3.89%. For uninsured, the lowest has risen to a range of 4.09% to 4.19%, depending on your situation. 

If your mortgage is renewing before the end of 2026, build your budget around the rate available today, not the rate you hope might appear later. Any delay could result in having to accept a higher mortgage rate.

Interested in knowing the lowest mortgage rate you’ll be eligible for? Reach out to us today and we’ll confirm the lowest rates available based on your specific situation and personal goals. 

For more information on why mortgage rates seem to be all over the place, check out my blog on Why Different People are Quoted Different Rates . 

 

Could Fixed Mortgage Rates Still Fall?

Yes… even if the overnight rate does not.

Fixed rates could drop if:

  • inflation data softens
  • economic growth weakens
  • unemployment rises
  • Government of Canada bond yields fall
  • global bond markets move lower
  • lenders compete more aggressively for mortgage business.

However, I would not count on fixed rates to fall. Any delay in locking in a rate could result in having to accept a higher rate. Get a rate locked in today. If the rate ends up dropping, then we can get your rate lowered for you… and we love surprising our clients with lower rates! They don’t even have to ask. At PMT Mortgage, we’re actively monitoring the lowest mortgage rates for our clients. If another lender comes out with a lower rate, then we can always move you to that lender, providing there is still a comfortable amount of time before your closing or renewal date. 

Additional reading: What Happens if Mortgage Rates Drop After You’re Approved? 

 

FAQ: Mortgage Rates by the End of 2026

Will the Bank of Canada cut rates before the end of 2026?

The current consensus says no. Most major-bank forecasts expect the overnight rate to remain at 2.25% through year-end. Forecasts can change if the economy weakens sharply, but a 2026 cut is not expected. 

Could the Bank of Canada raise rates in 2026?

Yes. Scotiabank is the clearest more-hawkish outlier in the current forecast group, allowing for possible hikes later in the year. A hike would require inflation or economic conditions to become more concerning.

Will fixed mortgage rates fall if the Bank of Canada holds?

Not necessarily. Fixed mortgage rates are influenced primarily by bond yields and lender funding costs… among other factors. They can rise or fall while the overnight rate remains unchanged.

Are variable mortgage rates expected to change before year-end?

Under the consensus hold scenario, variable mortgage rates should remain broadly stable. They would likely rise if the Bank of Canada hikes, while a cut would require a significant change in the economic outlook.

Should I wait for the next Bank of Canada announcement?

Do not make the decision based on the announcement date alone. If your mortgage closes or renews soon, compare today’s options, understand the available rate hold and assess whether your budget can handle a hike. There is no benefit to waiting… and doing so may leave you with a higher rate.

 

Final Thoughts

The most realistic mortgage-rate outlook for the remainder of 2026 is a prolonged hold at a 2.25% overnight rate, with a genuine but limited risk of hikes. There is no credible consensus pointing to a Bank of Canada cut before year-end.

There are no guarantees. But you can still make a strategic decision… and we love to help our clients make the right decision based on their own unique circumstances and future goals!

If you are buying, closing or renewing before the end of 2026, reach out to us before accepting the first rate you see. We can compare lender options, explain the trade-offs and help you make a decision based on leverage, risk and long-term strategy.