Canadian mortgage rates are moving in two different directions at once this fall, and the split is reshaping what borrowers can expect heading into 2026 renewals. The Bank of Canada is widely expected to hold its policy rate at 2.25% at its October 28 decision, leaving variable mortgage rates unchanged. But fixed mortgage rates have already risen, pulled up by bond markets that have moved faster than the central bank, according to nesto’s October 9 mortgage rate forecast.
The 5-year Government of Canada bond yield, which lenders use as the benchmark for pricing fixed mortgages, hit a 52-week high near 3.73% on September 28. In response, all of Canada’s Big Six banks have raised select fixed rates in recent weeks. As of mid-October, nesto listed the lowest available 5-year fixed rate at 4.59% across several major markets, including Montreal, Quebec City, Vancouver and Edmonton, while its lowest 5-year adjustable rate sat at 3.41%.
Renewals Bring Payment Shock for a Third of Borrowers
The timing matters because a large wave of Canadians is renewing mortgages for the first time since the Bank of Canada began raising rates in 2022. Nesto’s forecast estimates that by the end of 2026, roughly 33% of Canadian mortgage holders will face higher monthly payments, with about 75% of that group holding 5-year fixed-rate mortgages. For fixed-rate borrowers renewing this year, nesto projects payment increases averaging around 20%, reflecting the shift away from pandemic-era ultra-low rates.
Variable-rate borrowers are experiencing a more mixed outcome. Those with adjustable-rate mortgages have already absorbed most of the impact of earlier hikes and, with the policy rate expected to hold, some could see modest relief. Borrowers with variable-rate mortgages that keep payments fixed while the amortization period adjusts face a wider spread of results: nesto estimates about 10% of this group could see payments rise more than 40% at renewal, while roughly 25% could see payments fall by at least 7%, depending on how they managed payments during the tightening cycle.
Strain from renewals is starting to surface in credit data. Equifax Canada’s second-quarter 2026 Market Pulse report put severe mortgage delinquency — balances 90 or more days past due — at 0.30% of balances, up 33.8% from a year earlier, and at 0.23% of accounts, up 17.5%. Equifax identified Ontario and British Columbia as particular outliers, with missed payments on non-mortgage debt among Ontario mortgage holders up 27% by balance, and reported insolvencies at their highest rate since 2009, with a sharp rise among homeowners.
What’s Keeping the Bank of Canada on Hold
The case for a steady policy rate rests on an economy that looked stronger than expected over the summer but has since cooled. Statistics Canada reported real GDP grew 0.8% in the second quarter, an annualized 3.3% — the fastest pace in more than three years — driven by a 3.6% rise in exports, a rebound in business capital investment after five straight quarterly declines, and a 2.5% increase in residential investment as resale activity picked up in Ontario, Quebec and British Columbia.
That momentum has since faded. A September 29 Statistics Canada release showed real GDP was unchanged in July, with an advance estimate pointing to just a 0.2% gain in August. The September Labour Force Survey added to the softer picture, with employment falling by 68,000 jobs after a 42,000 drop in August, pushing the unemployment rate to 6.5%. In a September 21 speech, the Bank of Canada said that if new U.S. tariffs remain in place, fourth-quarter growth could roughly halve to below 1%.
Canada’s external accounts, meanwhile, strengthened. The current account swung from a revised first-quarter deficit of $8.3 billion to a second-quarter surplus of $8.8 billion — the first surplus since 2022 and the largest since 2005 — while foreign investors bought a record $80.8 billion of Canadian government bonds over the same period, a flow that feeds directly into fixed mortgage pricing. As of early October, money markets were pricing in roughly 100 basis points of Bank of Canada rate increases over the following 12 months, with about 1-in-4 odds assigned to a quarter-point hike at the October 28 meeting. Most bank economists, nesto noted, still expect the first rate increase to come in 2027.
Canadian Mortgage Rate Snapshot, October 2026
How Rates Are Playing Out in Local Housing Markets
The rate environment is unfolding against housing markets that vary sharply by region. In Vancouver, Greater Vancouver Realtors reported August sales of 1,869, down 4.6% year-over-year and 20.7% below the region’s 10-year seasonal average, with the composite benchmark price falling 5.6% to $1,081,900. GVR chief economist Andrew Lis attributed the slowdown partly to mortgage rates that remain high enough to keep buyers on the sidelines.
In Edmonton, the Realtors Association of Edmonton reported 2,143 sales in August, down 9.8% from a year earlier, with inventory up 15.1% and the composite benchmark essentially flat at $426,900. Quebec’s housing associations reported a different pattern, with the province’s composite benchmark up 3.1% year-over-year to $540,800 even as active listings climbed 21%, while Montreal posted a composite benchmark of $583,900, up 2.2% annually, despite a 13% drop in sales.
For borrowers, nesto’s calculations show each $100,000 of mortgage balance currently costs about $564 a month on its lowest fixed 5-year rate of 4.59%, versus $503 a month on its lowest adjustable 5-year rate of 3.41%. On the variable side, a quarter-point change in the Bank of Canada’s policy rate shifts that payment by roughly $13.47 per $100,000 if rates rise, or $13.27 if they fall — a sensitivity fixed-rate holders are insulated from until their term ends.
This article is for informational purposes only and does not constitute financial, investment, or legal advice. Consult a licensed financial advisor before making investment decisions.
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