By the end of 2026, more than a third of Canadian homeowners will renew their mortgages, many of them facing higher rates. (Credit: Azin Ghaffari/Postmedia News)
Mortgage borrowers who have been holding out for lower interest rates are now finding they have run out of time, say industry professionals.
Fixed-rate mortgages, which are influenced by market conditions and government bond yields, have been drifting higher, rising from a range of mid-3 per cent this fall to low 4 per cent now.
“Over the past few months, I’ve seen clients turn down fixed-rate renewal offers around 3.7 per cent because they were convinced rates would keep falling,” said Leah Zlatkin, a mortgage broker and LowestRates.ca expert.
“Now those same borrowers are coming back and finding that the best available rates start with a four. That delay is already resulting in higher monthly payments.”
By the end of 2026, more than a third of Canadian homeowners will renew their mortgages, many of them at higher rates from the lows of the pandemic.
Over the past year, variable rates have dropped more than fixed, from 7 per cent in June 2024 to slightly below 4 per cent as the Bank of Canada cut its benchmark rate.
However, further relief on this front now looks unlikely with the central bank expected to keep rates steady this year or, as some believe, raise them by year end.
Meanwhile, fixed rates have fallen just slightly more than 100 basis points, with five-year terms less than that.
Bond yields have been pushed higher recently by the central bank’s decision to keep rates on hold and economic data beating expectations. They can also be influenced by inflation, public deficits and international financial conditions.
Because fixed rates are dictated by market conditions delays could lead to higher rather than lower rates, said Zlatkin. And even a small increase in a rate can add up to higher monthly payments, especially for homeowners with larger mortgages.
One surprising trend in Canada has been the decline in popularity of the five-year term, a traditional preference, said Hendrix Vachon, Desjardins Group principal economist, in a recent report.
Before the pandemic, about 30 per cent of new financing was on a five-year or more term, but between 2022 and 2025 that share dropped to 15 per cent, according to data from the Bank of Canada.
The most popular mortgages now are fixed rate with terms between three and five years, accounting for nearly 40 per cent of mortgages, he said.
Zlatkin said choosing a shorter term can help borrowers secure today’s rates while leaving room to adjust if conditions change.
Homebuyers should also take heed. In the current buyer’s market, negotiating a better price can help offset mortgage rates, but timing still matters.
