Mortgage rates 2026: how the trade war affects your mortgage

Why rates remain high

For several years, central banks have been trying to slow inflation without triggering a major recession. Global trade tensions complicate this balance.

When the United States imposes tariffs or restricts certain imports, costs often rise for businesses and are then passed on to consumers.

Canada is not always targeted directly, but its economy remains closely tied to that of the United States. A rise in U.S. costs can therefore affect prices in Canada.

The trade war is not acting alone. In June 2026, the Bank of Canada also cited higher oil prices linked to the conflict in the Middle East as a driver of inflation. The CUSMA review, scheduled for July 2026, adds another dose of uncertainty. These factors influence bond yields, which weigh heavily on fixed mortgage rates.

To better understand how home loans work, also read this article on mortgages in Canada.

What is the link with the United States?

Canada exports a large share of its products to the United States. When the U.S. economy slows or becomes more protectionist, the consequences are quickly felt here.

Tariffs and inflation

Trade wars often drive up production costs. Materials, imported products, and consumer goods become more expensive.

This inflationary pressure pushes central banks to keep rates higher for longer. Even a gradual cut to the policy rate can be slowed. The Bank of Canada is also forecasting a return of inflation to the 2% target only in 2027.

As a result, Canadian households continue to deal with significant mortgage payments.

The impact on the Bank of Canada

The Bank of Canada monitors Canadian inflation, but also global economic conditions. This partly explains why the policy rate is being kept at 2.25% in 2026.

If the United States keeps rates high for longer, Canada is often reluctant to cut its own rates sharply. Too wide a gap could weaken the Canadian dollar and raise import costs.

To track how monetary decisions are evolving, read this analysis of the Bank of Canada policy rate.

Mortgage rates 2026 – Impact on mortgages

The consequences vary depending on your mortgage type and your renewal date.

Variable-rate loans

Variable-rate mortgages remain directly tied to the Bank of Canada’s decisions. In June 2026, the best 5-year variable rate is around 3.30%.

Some homeowners were hoping for rapid cuts in 2026, but the international context is slowing that movement. Many households therefore continue to pay high monthly payments or repay more interest.

If inflation slows faster than expected, variable rates could become attractive again in the medium term.

Fixed-rate loans

Fixed rates respond more to bond markets than to the policy rate. In June 2026, the best 5-year fixed rate is around 3.99%.

Investors often demand higher yields when economic uncertainty increases. Trade tensions can therefore keep fixed rates at a relatively high level.

In this context, many borrowers hesitate between the stability of a fixed rate and the potential savings of a variable rate.

This article on choosing between a fixed or variable rate can help you compare the two options.

Mortgage renewal

Many Canadians are currently renewing a mortgage obtained during the years of very low rates. CMHC expects payments to rise by about 20% on average at renewal, and nearly one-third of borrowers will face a higher payment in 2026.

The shock can be significant: an increase of just a few percentage points is sometimes enough to add several hundred dollars per month.

Comparing offers then becomes even more important. Even a small rate difference can represent several thousand dollars over five years.

Renewal payment example

Take a $400,000 mortgage signed in 2021 at a 1.99% 5-year fixed rate, amortized over 25 years. The monthly payment was about $1,692. In 2026, about $335,000 remains to be repaid over 20 years. The table shows the new payment based on the rate you get.

Assumptions: monthly payments, semi-annual compounding, no prepayments. The 4% and 4.5% rates are examples, not lender offers. The 20% to 25% increase is in line with the Bank of Canada's analysis: for 5-year fixed mortgages renewing in 2026, it expects an average payment increase of about 20%.

According to the same analysis, about half of affected borrowers could eliminate the increase by extending their amortization by 5 years. In the $400,000 example, going back to 25 years at 4% brings the payment down to about $1,762. However, you will pay more interest overall.

Mortgage rates 2026 – Should you choose fixed or variable?

There is no universal answer in 2026. Your choice mainly depends on your risk tolerance and your financial situation.

A fixed rate offers more budget stability. You know your payments in advance, which is reassuring in an unstable environment.

A variable rate, on the other hand, could become advantageous if rates gradually decline over the next few years. However, trade tensions and economic uncertainty make forecasts more difficult than usual.

Before deciding, it may be helpful to obtain a mortgage pre-approval to assess your current borrowing capacity.

How to reduce the impact of rates

Even in a challenging environment, certain strategies can limit the effects of high rates.

Compare mortgage rates

Rate gaps between lenders remain significant in 2026. Comparing several institutions can noticeably reduce your costs.

The mortgage rate comparison tool in Canada lets you quickly see the offers available based on your profile.

You can also read this analysis of Nesto and the best mortgage rates.

Improve your financial profile

A good credit score makes it easier to access the best rates.

Before applying for a mortgage, avoid late payments and limit excessive use of available credit.

Here is also a useful guide to better understand your credit file.

Spending categories

A credit card does not directly affect your mortgage rate, but it can help on two fronts: improving your credit score before applying, and earning back part of your spending to offset higher payments.

However, pay your balance in full each month: credit card interest rates are far higher than mortgage rates, and carrying a balance hurts your score.

Reduce your debt-to-income ratio

Lenders closely review your debt ratios when rates are high.

Paying down certain debts or increasing your down payment can improve your chances of approval.

This article explains how mortgage debt ratios work.

Opportunities despite higher rates

Even with high rates, some opportunities exist for well-prepared buyers.

In many regions, higher borrowing costs are slowing housing demand. This can reduce pressure on prices and provide more negotiating power.

Some buyers also use high-interest savings accounts to accelerate their down payment before purchasing.

You can compare the best high-interest savings accounts currently available in Canada.

For future homeowners, this article also shares several tips for buying your first home.

Conclusion

Mortgage rates in 2026 remain influenced by the global economy and trade tensions with the United States, as well as oil prices and the CUSMA review. Many Canadians were hoping for a quick return to the low rates seen before 2022; the situation remains more complex.

However, there are ways to reduce the impact of high rates. Comparing offers, improving your financial profile, and planning your renewal in advance can make a real difference.

Before signing or renewing a mortgage, use the mortgage rate comparison tool to get an overview of your options. And to keep up with rate trends and the best offers, subscribe to our newsletter.

Mortgage rates 2026 – FAQ

Will mortgage rates go down in 2026?

Possibly, but cuts could be gradual. As of September 2026, the Bank of Canada is keeping its policy rate at 2.25%, and inflation as well as the U.S. economy are still influencing its decisions.

Could rates go back up before the end of 2026?

It is possible, but nothing has been announced. The Bank of Canada held its policy rate at 2.25% at all six of its 2026 announcements, and its next decisions are due on October 28 and December 9. Bank forecasts change often. A fixed rate protects your payment for the full length of the term.

Does the trade war really affect mortgages?

Yes, in part. Trade tensions increase economic uncertainty and can keep rates higher for longer. Other factors also play a role, such as oil prices and the CUSMA review.

Is it better to choose a fixed or variable rate in 2026?

That depends on your risk tolerance. The fixed rate (around 3.99% for 5 years in June 2026) offers more stability, while the variable rate (around 3.30%) could become advantageous if rates decline.

Why compare multiple mortgage lenders?

Rate differences can be significant. Comparing several offers can reduce your monthly payments and the total cost of your mortgage.

Does a good credit score really help?

Yes. A better credit score generally makes it easier to access the most competitive mortgage rates.