A trend seen earlier in the year is fading as borrowers opt for security
Earlier in the year, expectations of further interest rate cuts by the Bank of Canada appeared to be convincing plenty of Canadians that variable-rate mortgages were a viable option once again.
Those products – and shorter-term fixed-rate mortgages – saw a jump in popularity at the beginning of 2025 as borrowers eyed potentially lower rates down the line.
But as the year draws to a close, are Canadians now gravitating back towards longer-term fixed rates with plenty of economic uncertainty in the air?
There’s little difference at present between variable rates and their five-year fixed counterparts, but some mortgage brokers say their clients are still largely preferring the safety and security of long-term fixed rates.
That’s partly due to the “turmoil” that could be in store for the economy in the next couple of years, according to 6ix Mortgage broker Taz Zaide (pictured top) – but also because the Bank of Canada has given strong signals that it’s at or near the end of its rate-cutting cycle.
But recent years have taught mortgage market watchers that nothing is certain when it comes to interest rates, and an unforeseen economic event – or further downturn – could lead the Bank to change those plans.
“The main thing to remember is that obviously we expect variable rates to stay stagnant and then possibly increase in 2027 off the market survey,” Zaide told Canadian Mortgage Professional, “but keep in mind that anything can happen.
“It’s one of those things where if some type of economic uncertainty comes across or some type of news that affects rates, variable rates could further fall as well.”
Zaide was referring to the Bank’s latest Market Participants Survey, which showed that few respondents among banks, dealers, insurers, pension funds, and asset managers expect more rate cuts in 2026.
Central bank governor Tiff Macklem has also warned against expecting big imminent reductions, indicating after its last cut that decisionmakers view the current level as largely appropriate.
Nothing guaranteed in today’s volatile mortgage market
But Zaide said he’s advising clients to be mindful that things can change quickly. “That’s the thing – with these long-time borrowers, it’s just like a weather forecast where it’s unpredictable at best,” he said.
“You can only predict so much, but that doesn’t mean it’s going to be accurate. I’d still take that with a grain of salt and play it reactively. That’s kind of my suggestion to most clients – this is the projection as of today, but this could easily change tomorrow.”
For borrowers whose mortgage is coming up for renewal, the likelihood of the Bank of Canada keeping rates in check for a while means significant further relief isn’t ahead – on the variable-rate front, anyway.
Still, while plenty of market watchers have been highlighting the flood of mortgages renewing in 2026, Zaide said clients don’t appear to be seeing significant pain at present.
Many who took out a mortgage in 2023, he pointed out, will actually see their payments fall. “It’s actually better for those individuals because they’re able to secure something where they’ll be able to pay a lot less money on their mortgage payments due to the interest savings,” he said.
When will the housing market rebound?
But with rates not budging much for now, will current borrowing costs be low enough to jolt Canada’s housing market into life?
It’s too early to say, according to Zaide, particularly with many homebuyers preferring to put their plans on ice until the end of the year and recommence at some point early in 2026.
“It’s usually the middle of January when things start to slowly pick back up again,” he said. “Obviously, November and December can be quite slow. But the other thing is that obviously we’ve seen that prices have not taken too much of a rise either. They’re still down since even the summer.”
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