With fixed-rate borrowers poised for steep payment increases at renewal time, one analyst says variable rates could see their popularity jump
Ratehub.ca has released its 2026 mortgage market predictions, with insights from mortgage expert Penelope Graham forecasting a shift toward variable-rate products as fixed-rate borrowers face significant payment increases upon renewal.
Variable-rate mortgages have fallen below fixed rates for the first time since 2022. The lowest five-year variable option in Canada stands at 3.45%, compared with the current fixed low of 3.94%, a 49-basis-point difference that may widen further throughout 2026.
“In 2025, borrower interest in variable rates rose as the Bank delivered additional rate cuts over the autumn months; on a year over year basis, the number of inquiries for variable-rate mortgages on Ratehub.ca increased by 25.7% year over year accounting for 11.5% of all inquiries, compared to just 7% in 2024,” noted Graham.
Fixed-rate renewals face steep increases
Homeowners renewing fixed-rate mortgages in 2026 will face substantially higher payments than under their expiring terms. According to Ratehub.ca’s calculations, a homeowner who purchased a $607,280 home in December 2020 with a 10% down payment and a five-year fixed rate of 1.39% would have paid $2,224 per month.
When renewing in December 2025, that same homeowner would face a monthly payment of $2,800 at today’s best renewal rate of 3.94%, an increase of $576 per month, or 26%.
Variable-rate borrowers are expected to experience a more modest impact. Those renewing from a December 2020 variable rate of 0.99% would see their monthly payments rise by $107, or 4%, to $2,797.
Bank of Canada signals rate hold
The Bank of Canada has adopted a rate-hold stance heading into 2026. In both its October and December rate announcements, the Bank’s Governing Council emphasized that the current policy rate is “about right” to support economic conditions.
“Surprisingly strong GDP and labour numbers at the end of the year also show there’s little need for the Bank to heap on additional stimulus at this time – and won’t need to in the year to come, should the economy perform as the Bank has forecasted,” said Graham. “Overall, the Bank expects inflation — a key pillar of its decision making – to remain close to its 2% target in 2026, before trending upward at year’s end as the economy strengthens, which may open the door to a rate increase in early 2027.”
Housing market remains sluggish
Canada’s housing market underperformed expectations in 2025, Graham noted. US tariff threats and broader market volatility pushed many buyers into decision paralysis, contributing to steadily rising inventory in major real estate centres.
Home prices have yet to reheat, though they remain well above incomes in most large markets. With the Bank of Canada maintaining its rate hold, limited rate relief on the horizon is expected to do little to stimulate demand.
Graham suggests motivated buyers may face favourable conditions, with ample listings and mortgage rates appearing to have bottomed out, potentially leading to a modest post-holiday increase in activity.
