Canadians face pivotal mortgage choices as rate cycle flattens

With fixed mortgage rates holding steady and policy moves largely on pause, early 2026 has shaped up as a reset point for Canadian borrowers. The era of rapid rate swings have eased, but the decisions facing homeowners at renewal or refinancing have become more complex rather than simpler.

Borrowers are no longer betting on dramatic cuts. Analysts expect the Bank of Canada’s overnight rate to hover around 2.25% into 2026, signalling that the bulk of easing is likely behind the market even as inflation stayed close to target.

“​We’ve moved into a much more normalized rate environment,” Leah Zlatkin, licensed mortgage broker and LowestRates.ca expert, said.

“There’s no clear signal that rates are heading materially lower, and in some cases we’re already seeing lenders adjust pricing upward. That made it important for borrowers to focus on what was available now rather than waiting for a perfect moment that might not come.”

Renewal season demanded earlier planning

Many borrowers who locked in during the pandemic’s rock‑bottom rates were rolling into higher‑payment renewals in 2025 and 2026. Bank of Canada analysis suggests many of those borrowers could see payments rise by 15–20% at renewal.

“Homeowners with renewals coming up in the next few months should review their lender’s offer well in advance,” Zlatkin said. Early broker conversations allow borrowers to test whether renewal terms were truly competitive and to explore shorter terms or products with more flexible prepayment features, she added.

Beyond the headline rate

Zlatkin stressed that structure matters as much as pricing. “Prepayment privileges, penalties, and mortgage structure could be just as important as the rate itself,” she said. “Those features can significantly affect long‑term costs if circumstances change or refinancing becomes necessary.”

That focus on structure has grown more urgent after a surge in fixed‑payment variable products. Regulators warned that borrowers in those mortgages could face “payment shock” when amortizations snap back to contractual schedules at renewal.

Stability favoured deliberate strategies

Zlatkin urged borrowers to decide explicitly whether predictability or flexibility matters more.

“With rates no longer clearly trending downward, choosing the right balance between predictability and flexibility was especially important,” she said. Variable‑rate options, she noted, should be chosen deliberately, not simply on hopes of near‑term cuts.

“What we were seeing then was a period of relative stability,” Zlatkin said. “That didn’t mean borrowers should be passive. Having a clear plan, understanding your options, and getting organized early could make a meaningful difference.”