If you’re looking for further rate drops from the Bank of Canada before jumping into the real estate market, maybe don’t hold your breath.
On Dec. 10, the Bank of Canada decided to keep its policy interest rate at 2.25%, following two consecutive 25 basis point cuts made in September and October.
The consensus among Canadian economists is that this will more or less be around the rate we see throughout 2026, barring any exceptional political or economic events.
For anyone thinking of buying a home in the new year, or for anyone already carrying a mortgage, this outlook actually signals a moment of relative stability in borrowing costs.
We spoke to Ryan Biln, Economist at the Canadian Real Estate Association (CREA), to get a better understanding as to what the Bank’s decision means for Canadian home buyers, sellers and homeowners.
What should prospective home buyers keep in mind if they are looking to buy in 2026?
The short answer is this: interest rates probably won’t stray too far from where things are now. Biln suggests those looking to buy a home next year should focus less on waiting for further rate drops and more on their local market conditions and affordability levels.
For example, if you live in a market with properties sitting on the market longer than normal, you may start to see more bargains.
“Slower activity and higher inventory in some markets and for some property types may give buyers more time and choice compared to certain periods over the last decade,” Biln says.
What will Canadian real estate markets look like in 2026?
Looking at a national level, CREA is forecasting 509,479 home sales in 2026—up 7.7% compared to this year—hitting a level not seen 2021. That amount is still slightly under the 10-year average, however.
The national average home price is forecast to increase by 3.2% from 2025 to $698,622 in 2026. This would mark the sixth straight year where the national average home price has hovered around the $700,000 range.
“Demand will remain strong, driven primarily by Canada’s largest age cohort, those in their late 20s and in their 30s, who continue to enter the housing market and are more willing to relocate from within provinces and between provinces to secure housing,” Biln says.
What if your mortgage is up for renewal in 2026?
The Bank of Canada reports more than 60% of all outstanding mortgages are expected to renew in 2025 and 2026 as many Canadians took advantage of the ultra-low rates being offered back then when we were recovering from pandemic shutdowns.
Those renewals will come with payment increases, as most borrowers tended to opt for five-year fixed mortgages.
“These overall numbers, however, hide large differences between borrowers and between types of products,” the Bank states. “For instance, mortgage holders with a five-year, fixed rate contract renewing in 2025 or 2026 could face an average payment increase of around 15% to 20% compared with their payment in December 2024. Those with variable rates and variable payments could see an average payment decline of around 5% to 7%.”
The classic question: fixed rate mortgage or variable rate mortgage?
Right now, you may qualify for a five-year fixed rate for as low as 3.79%.
Fixed rates have edged slightly higher in recent weeks, and broader economic factors could play a role in where they go next.
Over the past 20 years, variable rates have outperformed fixed rates, except during the early pandemic days.
“Variable rates are now lower than the average five-year fixed,” Biln says. “Looking ahead, it’s hard to tell which would be the better option, but prospective home buyers should carefully weigh the risks and benefits of each mortgage type and term, and choose the best option for their financial situation and risk profile.”
The information discussed in this article should not be taken as financial or legal advice. This article is for informational purposes only.