It’s May 2026, and if you feel like the world is spinning a little faster than usual, you’re not alone. Between the daily headlines about new tariffs coming out of Washington and the ongoing volatility in the Middle East affecting oil prices, trying to pick a mortgage rate feels a bit like trying to predict the weather in Toronto: impossible, but we all try anyway.

Right now, the Bank of Canada (BoC) is sitting steady with a policy rate of 2.25%, which has not changed since October 29th, 2025. This is the rate that banks use to set their prime rate, which remains at 4.45%. We’ve come a long way from the hiking cycle of a few years ago, but the “what comes next” question is splitting the experts right down the middle.

The “Big Six” banks seem to be in somewhat of a boardroom brawl over where rates are headed. One bank says one thing while another says something different… and you’re left caught in the middle.

So, let’s break down the chaos, look at the math, and figure out how to navigate this market like a pro.

 

The Great Bank Divide: Scotiabank vs the Rest of the Big Six

Five of the big six banks are taking a much more neutral stance, forecasting no movement at all for the remainder of 2026, with the Bank of Canada holding the overnight rate steady at current levels.

On the other side, we have Scotiabank. They’re looking at the same data but seeing a different ghost. With the war in Iran creating massive pressure on global energy prices and the potential for a “Trump 2.0” tariff war to drive up the cost of imported goods, they’re worried about a second wave of inflation. They are currently forecasting a 0.50% hike from the BoC in Q3 of this year… with another 0.25% in Q4. 

When the smartest guys in the room can’t agree, it tells you one thing: Uncertainty is the only certainty.

The question is… who is right? We have five banks saying one thing with only one calling for not just a 0.25% hike… but 0.75% by the end of the year. 

Here’s what the Big Six are projecting for rate movement until the end of 2027: 

Of all the banks, Scotia is the only one forecasting movement in 2026. All other movement is expected in 2027.

 

The Variable Rate Edge

With fixed mortgage rates rising, the spread between fixed and variable has increased, which has resulted in variable rate mortgages becoming more popular once again.

The lowest 5-year variable rate for an insured mortgage is currently as low as prime -1.05% (3.40%). 

The lowest 5 year fixed for an insured mortgage has risen to 4.09% for purchases or 4.19% for transfers at renewal. 

Considering that variable rate mortgages were higher than their fixed rate alternatives over most of the last four years, they are now a respectable 0.69% to 0.79% lower in the insured mortgage. 

For uninsured mortgages, the lowest variable rates carry a wider range. Anywhere from prime -1.05% (3.40%) to prime -0.70% (currently 3.75%)… depending on your situation.

Uninsured 5-year fixed rates have a much narrower range: 4.19% to 4.29%.

For more information on the criteria used to determine the lowest mortgage rates you’ll be eligible for, check out my blog on Why Different People are Quoted Different Rates. 

 

The “Beat the Bank” Strategy

So, how do you play this?

There is no one-size-fits-all mortgage advice. What’s right for one person may not be right for the next. If your neighbour is telling you, “you’d be crazy to go with a fixed rate”, then that’s their opinion based on their specific financial situation, comfort level and tolerance for risk. While they may like the idea of a variable rate, it does not mean it’s the right choice for you. 

Tolerance for risk is one of the biggest considerations when choosing between a fixed or variable rate. Regardless of what the forecasts say… or your neighbour for that matter, there are many who may become fraught with anxiety from the mere thought of a potential rate increase. If this sounds like you, then you’re better suited to a fixed rate mortgage. Ask yourself these questions: 

How would you feel if the Bank of Canada were to increase their rate sooner than expected? 

How would you feel if they increased their rate by more than expected? 

If your answer to these questions make you feel uncomfortable, then a fixed rate mortgage may be the best choice… regardless of what actually happens with rates moving forward. As I say in my book, the best choice isn’t always the one that saves you the most money. It’s the one that allows you to sleep soundly at night.

Still not sure? Here’s another juicy little strategy I often give to my clients who are sitting on the fence. Let’s say you qualify for a variable rate at 3.40%, but you were mentally prepared to pay the 4.09% fixed rate. Instead of taking the lower payment and spending the difference on UberEats, you can use your prepayment privileges to set your mortgage payment to match the higher, fixed rate option. 

Why does this work?

  • Instant Equity: That extra 0.69% goes directly toward your principal. You aren’t just paying interest; you’re “beating the bank” by killing the debt faster.
  • The Shock Absorber: If Scotiabank is right and rates go up, you’re already used to the higher payment. Your budget won’t feel a thing. You just adjust the “extra” principal portion down.
  • Flexibility: You get the low 3-month penalty of a variable mortgage with the stability of a fixed-rate budget. While fixed mortgage rates may also have a 3 months interest penalty, it often ends up being the much higher IRD (interest rate differential) penalty. You can read more about this in my blog on Mortgage Penalties Explained.

I would also suggest reading my blog on The Ultimate Guide To Choosing Fixed Vs. Variable, where I outline five different things to consider before choosing a variable rate mortgage. 

 

The Lowest Mortgage Rate vs the Right Advice

I’ll be honest with you: anyone can find a rate on a screen. But in a year like 2026, the rate is only half the story. The real value is in the strategy.

Are you planning to sell in three years? You may want to consider a variable rate to guarantee yourself the 3 months interest penalty. Is this your “forever home” and you have zero tolerance for seeing your rate change? Consider a fixed mortgage rate. 

We look at the spread, the geopolitical risks, and your personal goals. Sometimes the “cheapest” rate is actually the most expensive one if the terms are garbage.

It’s not always about finding the lowest rate. It’s about finding the right combination of low mortgage rate and strategy tailored to suit your goals. 

Final Thoughts

Deciding between fixed and variable in May 2026 isn’t just about picking a number; it’s about picking a side in a global economic debate. If you believe the Bank of Canada will eventually follow the path of further cuts, the variable rate at 3.40% offers an incredible entry point with the protection of a low exit penalty. However, if the “Trump-Iran” inflation scare keeps you up at night, locking in a fixed rate provides the peace of mind that a variable rate simply can’t offer.

At PMT Mortgage Corp., we don’t just “process applications.” We treat you like family, which means we give you the same advice we’d give our own siblings. Whether you’re looking for first-time home buyer programs or you’re ready to lock in a low rate for your mortgage renewal, we’re here to help you cut through the noise and make the decision best suited for you personally. 

As for what happens with rates? Time will tell and anything can happen.