The dawn of 2026 presents a new set of possibilities and challenges for Canadians navigating the mortgage market. Drawing on a detailed analysis of economic trends, industry expert Robert McLister has outlined five key predictions for the year ahead, offering a roadmap for borrowers facing renewal decisions and those seeking new financing.
Economic Uncertainty and Interest Rate Outlook
Canada's economic trajectory remains heavily influenced by external forces, particularly the ongoing renegotiation of the Canada-United States-Mexico Agreement (CUSMA). McLister notes that borrowing costs are essentially held hostage to these trade talks. A potential threat from former U.S. President Donald Trump to dismantle the agreement could temporarily spook bond yields and push mortgage rates lower due to market uncertainty.
Domestically, the consensus among economists is that the Bank of Canada will hold its key interest rate steady for most of the year, with any potential hike reserved for the final quarter. The bond market currently reflects a 50/50 chance of tightening by year-end, with almost no expectation of a rate cut. A significant wild card is the U.S. Federal Reserve's direction under a new chair perceived as aligned with Trump's administration. If the Fed cuts short-term rates despite persistent inflation, McLister predicts markets will react by adding a risk premium to long-term bond yields, which could subsequently lift Canadian mortgage rates.
The Looming Wave of Mortgage Renewals
A defining feature of 2026 will be the sheer volume of mortgages coming up for renewal. Nearly one-third of all Canadian mortgages are set to renew this year. For the average borrower with a five-year fixed or variable mortgage, the journey from 2021 to 2026 has been stark. Data from MortgageLogic.news shows the average rate has surged to approximately 3.84% in 2026 from a low of about 1.77% in 2021.
This more than doubling of rates translates to a payment increase of roughly $105 per month for every $100,000 borrowed. While significant, McLister points out this is less severe than the renewal shock forecasts made two years ago. This moderation is attributed to rates cooling from their 2023 peak, rising household incomes, and borrowers utilizing strategies like extending their amortization periods or making lump-sum payments.
Despite the payment hikes, McLister does not foresee a national default crisis. He expects mortgage delinquencies to edge higher but for 90-day arrears to remain below the 30-year historical average of 0.33%. "Canadians would rather eat cold beans than lose their front door," he quips, highlighting the strong cultural aversion to default.
Refinancing Hurdles and Lender Competition
One of the more nuanced challenges in 2026 will involve refinancing, particularly for homeowners in regions where property values have declined substantially. Borrowers in these areas may find it tougher to qualify for refinancing as lower home equity affects loan-to-value ratios, a key metric for lenders.
On a more positive note for those renewing, McLister observes that lenders have become "surprisingly aggressive" with their renewal pricing. This competition means well-qualified borrowers with a clean payment history can expect widespread offers of rate matching from their existing lenders as institutions compete to retain low-risk clients.
For those considering their rate options, McLister offers a pro tip tied to trade negotiations. Should Canada and the U.S. reconcile and a stable trade deal emerge, reinvigorated economic growth could stoke inflationary pressures. While this might make variable rates appear cheaper as bond yields rise, he advises against going fully variable. Instead, he recommends locking in at least a portion of one's mortgage with a hybrid product, reserving an all-variable strategy only for those who absolutely require maximum payment flexibility.
