Canada Interest Rate Forecast (2026–2030)

What are the current interest rates in Canada?

Canada's interest rate environment is shaped by two key benchmarks: the Bank of Canada's overnight rate and lenders' prime rates. The overnight rate influences borrowing costs across the economy, while prime rates directly affect variable-rate mortgages, lines of credit, and other floating-rate lending products. Fixed mortgage rates, meanwhile, are primarily influenced by Government of Canada bond yields rather than the Bank of Canada's policy rate.

As of June 2026, the key interest rates Canadians should be watching are:

Below, we'll look at where these rates could be headed next and what economists, financial markets, and bond investors are forecasting for the years ahead.

Bank of Canada interest rate forecast 5-year outlook

No one can predict interest rates with certainty, but financial markets use CORRA (Canadian Overnight Repo Rate Average) forward curves to estimate where the Bank of Canada’s overnight rate may move based on current economic conditions. The forecast below is based on market-implied CORRA forward curve data published by the Montréal Exchange (TMX). Because financial markets continually price new information, these projections are subject to change.

Overall, the forecast suggests the Bank of Canada’s overnight rate is expected to remain close to today’s level in 2026, before gradually moving higher over the next few years. For borrowers, this means variable mortgage rates and HELOC rates may stay relatively stable in the near term, but could become more expensive if the market-implied path plays out.

What do Canada's major banks predict for the Bank of Canada policy rate?

Most Canadian banks expect the Bank of Canada to keep its overnight rate relatively stable through the remainder of 2026, reflecting easing inflation, slower economic growth, and a labour market that has softened but remains resilient. BMO, CIBC, National Bank, RBC and TD all forecast the policy rate to stay at 2.25% through year-end, while Scotiabank expects gradual rate increases beginning in July if inflation proves more persistent than expected.

 

Will variable mortgage rates go down in 2026?

Variable mortgage rates are not expected to fall significantly in 2026 unless the Bank of Canada cuts its overnight rate. When the Bank of Canada raises or lowers its policy rate, most lenders usually make an equivalent change to their prime rate, causing variable mortgage rates to move up or down as well. Today, the Bank of Canada's overnight rate is 2.25%, while the prime rate at most major Canadian lenders is 4.45%. As of June 2026, the lowest five-year variable mortgage rate available through Ratehub is 3.45%, reflecting a discount below prime offered by lenders.

Since most major banks expect the Bank of Canada to keep its overnight rate unchanged through the remainder of 2026, variable mortgage rates are also expected to remain relatively stable in the near term. However, if inflation or economic growth shifts meaningfully, the Bank could adjust its policy rate, which would typically be reflected in lenders' prime rates and, in turn, variable mortgage rates.

When is the next Bank of Canada rate announcement?

The next Bank of Canada interest rate announcement is scheduled for July 15, 2026. The Bank of Canada typically makes eight scheduled interest rate announcements per year. These decisions are important for mortgage borrowers because they can directly affect lenders’ prime rates, which in turn impact variable-rate mortgages, HELOCs, lines of credit, and other variable-rate products.

 

What is the Bank of Canada’s neutral interest rate?

The Bank of Canada’s neutral rate is the interest rate range that is expected to neither stimulate nor slow down the economy. The Bank currently estimates Canada’s neutral rate range to be 2.25% to 3.25%. With the overnight rate currently at 2.25%, the Bank of Canada is at the lower end of its estimated neutral range. This means the central bank may have limited room to cut rates further unless the economy weakens more than expected. For mortgage borrowers, the neutral rate helps explain why interest rates may remain relatively stable. While rates could still move lower if growth slows or inflation cools faster than expected, borrowing costs are unlikely to return to the ultra-low levels seen during the pandemic.

Will the next Bank of Canada move be a rate cut or hike?

Most economists expect the Bank of Canada to hold its overnight rate steady through the remainder of 2026. However, Governor Tiff Macklem has indicated that future decisions will continue to depend on incoming economic data, meaning both a rate cut and a rate hike remain possible. 

The Bank of Canada may consider raising interest rates if:

• Inflation remains above its 2% target for longer than expected.
• Rising oil prices put upward pressure on inflation.
• Consumer spending and economic growth accelerate.
• Wage growth and the labour market remain stronger than expected.

The Bank of Canada may consider cutting interest rates if:

• Canada's economy slows more than expected or enters a recession.
• Inflation continues to cool toward the 2% target.
• Unemployment rises significantly.
• Global risks, including trade uncertainty, weaken economic growth.

While the current outlook points to stable interest rates, borrowers should remember that the Bank of Canada's decisions are data-dependent. Inflation, employment, GDP growth, and global economic developments can all influence the timing and direction of future rate changes.

Fixed mortgage rates forecast in Canada

Unlike variable mortgage rates, fixed mortgage rates are not directly influenced by the Bank of Canada's overnight rate. Instead, they're primarily driven by the Government of Canada five-year bond yield, which lenders use as a benchmark when pricing five-year fixed mortgages.

As of July 2026, the Government of Canada's five-year bond yield is around 3.1%. Because bond markets are forward-looking, bond yields often move before the Bank of Canada changes interest rates. As investors react to inflation, employment, economic growth and global events, Government of Canada bond yields—and, in turn, fixed mortgage rates—can move higher or lower in anticipation of future economic conditions.

Current market conditions suggest the five-year bond yield will remain near today's levels through the remainder of 2026. While short-term fluctuations are likely, most forecasts do not point to a significant or sustained move in either direction, suggesting fixed mortgage rates should remain relatively stable overall.

Are fixed mortgage rates expected to fall?

A significant decline in fixed mortgage rates is unlikely in the near term, but modest decreases remain possible if economic conditions weaken. For fixed mortgage rates to fall meaningfully, Government of Canada bond yields would likely need to decline first. That could happen if:

• Inflation falls back toward the Bank of Canada's 2% target more quickly than expected.
• Canada's economy slows or enters a recession.
• Employment weakens, increasing expectations of future Bank of Canada rate cuts.
• Global investors shift toward safer assets, pushing bond yields lower.

For most borrowers, the current outlook suggests fixed mortgage rates will likely move within a relatively narrow range rather than experience the sharp declines seen during previous easing cycles. If you're buying a home or renewing your mortgage, it's generally more important to secure a competitive rate that fits your budget than to try to time small market movements.