Why 2026 Might Be the Year of Rising Rates & What That Means for Your Mortgage

How to Prepare for a Possible Shift in Interest Rates Heading Into 2026

After a year of gradual easing, whispers across Canada’s financial sector suggest that the rate-cut cycle may be coming to an end. Many economists now expect interest rates to stabilize — and potentially rise again — as early as mid-2026. For homeowners, this means it’s time to start planning ahead.

Why Rates Could Rise Again in 2026

Recent forecasts from Canada’s major banks and financial analysts point to renewed upward pressure on rates. While the Bank of Canada’s key rate currently sits at 2.25% (as of October 2025), new data on GDP growth, housing demand, and global trade has raised questions about how long this low-rate environment will last.

Here’s what’s driving speculation:

• Stronger economic growth: Canada’s GDP is expected to rebound modestly in early 2026, fueled by consumer spending and exports.

• Persistent inflation risk: Even as inflation remains below 2%, wage growth and higher energy costs could trigger rate hikes to maintain balance.

• Housing demand: Renewed buyer activity is heating up urban markets, which could put additional pressure on affordability.

• Global influence: U.S. and European rate shifts often push Canadian lenders to adjust rates accordingly.

What Rising Rates Could Mean for Your Mortgage

If rates begin to climb again, the impact will depend on your mortgage type and renewal timing:

• Variable-rate mortgages: Monthly payments could increase as lenders adjust to new prime rates.

• Fixed-rate mortgages: Borrowers may be insulated for now, but future renewals could come with higher costs.

• First-time buyers: Rising rates can reduce purchasing power, making early pre-approvals more valuable.

Even a modest 0.50% rate hike can add hundreds to monthly payments — and thousands in interest over a mortgage term.

When to Act — and How to Plan Ahead

Being proactive is key to managing rising-rate risks:

1. Renew early: You can lock in a rate up to six months before your term ends.

2. Explore hybrid mortgages: Split your mortgage between fixed and variable to hedge against volatility.

3. Consider shorter terms: Shorter fixed terms (1–3 years) can help you stay flexible as the market evolves.

4. Run scenario models: Understand what different rate levels would mean for your payments and long-term goals.

Why It Pays to Plan with a Mortgage Broker

A mortgage broker can help model rising-rate scenarios, find lenders offering early renewal flexibility, and negotiate competitive fixed options before potential hikes occur. Brokers also monitor trends in real time, so you can adapt quickly if the Bank of Canada shifts direction in early 2026.

Stay Informed, Stay Ready

Rate increases aren’t guaranteed — but being prepared is smart financial strategy. Whether you’re renewing, refinancing, or planning your first home purchase, understanding how the market is moving puts you ahead of the curve.

At Arise Mortgage, we monitor every Bank of Canada announcement and lending trend so you can make confident, informed decisions — no matter where rates go next.