Fixed or Variable Mortgage in 2026: Which Makes Sense Now?
The Bank of Canada policy rate is 2.25%, held since December 2025 — seven straight holds through September 2026. Big-bank prime sits near ~4.45%. Forecasters mostly see the policy rate staying at 2.25% through end-2027, though a minority sees hikes back toward 3%. The honest answer: with rates flat, the fixed-vs-variable decision in 2026 is about your tolerance for being wrong, not about a consensus rate call.
Where rates stand right now
- Bank of Canada policy rate: 2.25%, unchanged since December 2025 (7 consecutive holds to September 2026).
- Big-bank prime rate: ~4.45%. Variable-rate mortgages are priced as prime minus a discount (e.g., prime − 0.75%), so a typical variable contract lands around 3.7% before adjustments.
- Fixed rates: priced off Government of Canada bond yields, not the policy rate — currently 5-year fixed contracts in the low-to-mid 4% range.
What the forecasts actually say
There is no consensus that rates move much at all:
| Forecaster | Policy rate expectation |
|---|---|
| BMO | 2.25% through end-2027 |
| CIBC | 2.25% through end-2027 |
| TD | 2.25% through end-2027 |
| National Bank | 2.75% by end-2027 |
| Scotiabank | 3.0% by early 2027 |
| RBC | 3.25% by end-2027 |
| BoC market-participants survey (Q2 2026) median | 2.25% through Dec 2026, 2.5% Q2 2027, 2.75% Q3 2027 |
The Bank of Canada's own market-participants survey (second quarter of 2026) puts the median expectation at 2.25% through December 2026, rising to 2.5% in Q2 2027 and 2.75% in Q3 2027. Read the spread, not the median: BMO, CIBC and TD see no change through end-2027, while RBC sees a full point of hikes. Anyone selling certainty here is selling something.
How each product actually moves
- Variable-rate mortgage: moves with your lender's prime rate, which tracks the Bank of Canada policy rate. If the policy rate stays at 2.25%, your rate stays put. If RBC's scenario plays out and policy rises to 3.25%, your variable rate rises roughly 1 point with it.
- Fixed-rate mortgage: moves with bond markets, which price in expected future policy moves. Fixed rates can rise even while the Bank of Canada holds — if bond traders start believing the RBC/Scotiabank hike scenarios, 5-year fixed quotes move up before the Bank does anything.
This is why "the Bank held, so fixed rates should be fine" is wrong. Fixed and variable are priced off different things.
The trade-off math, without a recommendation
- Variable wins if: the policy rate stays at 2.25% or falls. You pay less interest than the fixed borrower, and variable penalties are typically just 3 months' interest — much cheaper to break.
- Fixed wins if: rates rise toward the RBC/Scotiabank scenarios. You lock in certainty while variable borrowers absorb the hikes. Fixed penalties, though, can be large — the interest-rate-differential (IRD) calculation on a big mortgage can reach tens of thousands of dollars.
- The historical pattern: variable has cost less than fixed more often than not in Canada, but it has also produced the worst individual outcomes (2022–2023 borrowers who saw payments spike). The average outcome and the worst outcome are different questions.
Your decision inputs are: payment stability needs (can you absorb a 1% rate rise?), how long you'll keep the mortgage (IRD penalties punish early exits from fixed), and how much you trust the flat-rate majority vs. the hike minority.
Frequently asked questions
With 7 straight holds, is variable the obvious choice?
No. The holds tell you the past; your mortgage prices the future. Variable is cheaper only if the policy rate stays flat or falls. Three of the six major-bank forecasts above see hikes by end-2027. The hold streak is not a forecast.
What's the real difference between prime and the policy rate?
The Bank of Canada sets the overnight policy rate (2.25%). Banks then set their prime rates (~4.45%) independently — prime is a retail rate, not a central-bank rate. Variable mortgages are quoted as prime plus/minus a margin, so your rate moves when your lender moves prime, which follows the policy rate with a lag.
Should I lock in my variable rate now?
Most variable mortgages let you convert to a fixed rate at any time, at the lender's posted fixed rate at conversion. That option has value: it caps your downside if the hike scenario materializes. Check whether your mortgage agreement includes a free conversion option before you need it.
Do fixed rates fall if the Bank of Canada cuts?
Not necessarily and not immediately. Fixed rates follow 5-year Government of Canada bond yields, which move on expectations. If a cut is already priced in, fixed rates may barely move when it happens. Watch bond yields, not just Bank announcements.
Canadian Mortgage Calculator 2026 — CA$29
Model both paths with the Canadian Mortgage Calculator 2026.
Sources
- Nesto, Mortgage rate forecast Canada — bank forecasts for the Bank of Canada policy rate: https://www.nesto.ca/mortgage-basics/mortgage-rates-forecast-canada/
- Bank of Canada, Market Participants Survey — Second Quarter of 2026 — median policy rate expectations (2.25% through Dec 2026, 2.5% Q2 2027, 2.75% Q3 2027): https://www.bankofcanada.ca/2026/07/market-participants-survey-second-quarter-of-2026/
Disclaimer — please read. This article is for general information and educational purposes only. It is not tax, accounting, legal, financial, or immigration advice, and reading it does not create a professional or client relationship between you and Llandora. Tax and immigration rules change frequently and differ by country, province/state, and personal circumstances; figures, thresholds, and examples in this article may be outdated, incomplete, or incorrect, and may not apply to your situation. Always verify current rules with the official sources (CRA, IRS, IRCC, USCIS) and consult a licensed professional before making any decision. Llandora makes no warranty of any kind — express or implied — about the accuracy, completeness, reliability, or timeliness of this content. To the fullest extent permitted by law, Llandora disclaims all liability for any loss, damage, cost, or expense arising from errors or omissions in this article or from any action taken or not taken in reliance on it, whether direct, indirect, incidental, or consequential. You rely on this article entirely at your own risk.
免责声明——请仔细阅读。本文仅供一般信息参考和学习之用,不构成税务、会计、法律、财务或移民建议;阅读本文不在您与 Llandora 之间建立任何专业或客户关系。税务和移民法规经常变化,且因国家、省/州和个人情况而异;本文中的数字、门槛和示例可能已经过时、不完整或有误,也可能不适用于您的具体情况。在做出任何决定之前,请务必向官方来源(CRA、IRS、IRCC、USCIS)核实最新规定,并咨询持牌专业人士。Llandora 对本内容的准确性、完整性、可靠性或时效性不作任何明示或暗示的保证。在法律允许的最大范围内,Llandora 对因本文中的错误或遗漏、或因依赖本文而采取或未采取任何行动所导致的任何损失、损害、费用或开支(包括直接、间接、附带或后果性损失)不承担任何责任。您对本文的依赖完全由您自行承担风险。