After delivering four rate cuts throughout 2025 that brought the overnight lending rate down to 2.25%, the Bank of Canada announced on January 28, 2026, that rates will hold steady. This puts the overnight rate within the estimated neutral range of 2.25% to 3.25%.
What Happened in 2025
The Bank of Canada's aggressive rate-cutting cycle in 2025 was a response to slowing economic growth and easing inflation. The overnight rate dropped from 3.75% at the start of 2025 to 2.25% by year-end — a reduction of 150 basis points that significantly improved borrowing conditions.
Mortgage Rate Outlook for 2026
Despite the lower overnight rate, analysts do not anticipate material declines in mortgage rates in 2026. Fixed mortgage rates are expected to remain in the high-3% to mid-4% range throughout the year. Markets currently price just a 5-7% chance of any further BoC rate cut in 2026.
Variable vs. Fixed Rates
Variable-rate mortgage holders have already benefited from the 2025 cuts. However, the holding pattern means no further relief in the near term. For fixed-rate borrowers, rates are influenced more by bond yields than the overnight rate, and Canadian bond yields remain elevated due to global economic uncertainty and trade tensions.
Renewal Shock: What to Expect
Homeowners renewing their mortgages in 2026 face significant payment increases:
- Five-year fixed-rate borrowers: payments may rise 15-20%
- Average across all mortgage types: approximately 6% increase for 2026 renewals
Advice for Buyers
With rates stabilizing, 2026 presents a period of predictability — which can be a good thing for planning a purchase. You know roughly what rates will look like, and combined with increased housing supply, buyer negotiating power is the strongest it has been in years.
Whether you're renewing or buying for the first time, understanding your rate options is critical. Use our mortgage calculator to model different scenarios.