Will Mortgage Rates Drop Further in 2026? Expert Forecast

Mortgage rates have been one of the biggest financial concerns for Canadians over the past few years. After rapid increases and early signs of stabilization, many borrowers are now asking the same question: Will mortgage rates drop further in 2026? While no forecast is certain, expert analysis and economic indicators provide a clearer picture of what may lie ahead.

Current Mortgage Rate Environment in Canada

As Canada moves through a cooling inflation cycle, the Bank of Canada has shifted away from aggressive rate hikes. By late 2025, interest rates are expected to have reached a more balanced level, setting the stage for cautious adjustments rather than drastic changes.

This creates a foundation where rate declines in 2026 are possible, but likely gradual.

Expert Forecast: Will Rates Drop in 2026?

Most economists and mortgage analysts agree on three likely scenarios:

1. Gradual Rate Reductions

If inflation continues to ease and economic growth slows slightly, the Bank of Canada may introduce small, incremental rate cuts throughout 2026.

2. Stable Rates With Minor Fluctuations

Another strong possibility is that rates remain mostly flat, with minor ups and downs as policymakers monitor employment, housing demand, and global markets.

3. Unlikely Return to Ultra-Low Rates

Experts largely agree that the record-low mortgage rates seen during the pandemic are unlikely to return. Lending policies are now more focused on long-term stability than emergency stimulus.

Fixed vs Variable Mortgage Outlook for 2026

Fixed Mortgage Rates

Fixed rates in 2026 are expected to:

• Decline modestly if bond yields soften

• Offer predictable payments

• Appeal to borrowers seeking stability and risk control

Variable Mortgage Rates

Variable rates may:

• Benefit sooner from Bank of Canada cuts

• Offer short-term savings if rates trend downward

• Suit borrowers comfortable with payment fluctuations

Key Factors That Will Influence Mortgage Rates

Several forces will determine whether rates drop further:

• Inflation performance and cost-of-living trends

• Bank of Canada monetary policy decisions

• Global economic conditions, especially U.S. interest rates

• Housing supply and demand across Canada

• Employment and wage growth

These factors suggest measured adjustments, not sudden drops.

What Borrowers Should Do Now

Rather than waiting for the “perfect” rate, experts recommend:

• Improving credit scores

• Reducing consumer debt

• Comparing mortgage terms, not just rates

• Working with a mortgage professional to build a flexible strategy

Preparation often saves more money than timing alone.

Final Thoughts

So, will mortgage rates drop further in 2026? Possibly—but slowly and cautiously. Borrowers who stay informed and financially prepared will be best positioned to take advantage of any favorable changes while protecting themselves from uncertainty.