I’ve been in the mortgage business for over 18 years.
I’ve never seen a market like this one.
Variable rates are sitting around 3.65%. Fixed rates are hovering near 4.3%.
That 0.5% to 0.7% gap looks tempting. I get why you’d want to take it.
But here’s what most people don’t see coming.
The Bank of Canada Just Hit Pause
The Bank of Canada held its policy rate at 2.25% in April 2026. That’s the fourth pause since October 2025.
Governor Tiff Macklem said the current rate “looks appropriate.” But he also flagged two major risks: persistent high oil prices and additional U.S. tariffs on Canadian goods.
Translation: Nobody knows where rates are headed next.
The Bank expects inflation to peak around 3% in April, then decline to 2.5% by June and return to the 2% target by early 2027. That’s the plan.
Plans change.
What the Experts Are Saying
Financial markets are pricing in a 75% chance of a 0.25% rate hike by the end of 2026, with another hike coming in early 2027.
Scotiabank and Desjardins are flagging rate hike risk. They’re projecting the policy rate to climb to 2.75% by year-end. That’s 50 basis points of increases if inflation pressures stick around.
Most Big 6 bank economists think rates will end 2026 right where they started, at 2.25%.
But uncertainty is high right now.
The Geopolitical Wild Card
The conflict in Iran has restricted 20% of the world’s oil supply. That’s layering inflation risk on top of already fragile economic projections.
About 90% of goods exported to the U.S. are protected under the CUSMA framework, which is up for review in June 2026.
Tariffs create inflation. Inflation limits the Bank of Canada’s ability to cut rates.
The trade war with the United States is a key factor in mortgage rate decisions throughout 2026.
The Renewal Wave Nobody’s Talking About
Over a million Canadian mortgages are up for renewal in 2026.
Many of these homeowners locked in at pandemic-era rates below 2.50%. They’re about to face payment shock.
According to Bank of Canada research, mortgage holders with a five-year fixed rate contract renewing in 2025 or 2026 face an average payment increase of around 15% to 20% compared with their payment in December 2024.
About 60% of all mortgages in Canada are expected to renew in 2025 or 2026.
That’s a lot of people adjusting to higher payments.
Why I’m Recommending Fixed Right Now
I know the data. Variable rates have saved borrowers money about 80% of the time over the past 30 years.
But past performance doesn’t guarantee what happens next.
During the 2022-2023 rate hiking cycle, variable-rate mortgage holders paid 63% more in total interest compared to fixed-rate holders. That’s $23,579 more in cumulative interest over the period.
The current environment reminds me of 2022-2023.
When I look at oil prices, tariff uncertainty, and inflation pressures, I see more upside risk than downside for rates.
Fixed rates give you certainty. You know exactly what your payment will be for the next five years.
Variable rates give you flexibility. But they also give you exposure to forces you don’t control.
The Break Penalty Factor
Here’s something most people underestimate: the cost to break a mortgage early.
Variable mortgages typically charge three months’ interest as a penalty.
Fixed mortgages use an Interest Rate Differential calculation, which can cost five figures more at Big Banks.
If you think there’s any chance you’ll sell, refinance, or need to break your mortgage before the term ends, the penalty difference matters.
Most variable mortgages also let you lock into a fixed rate at any time without breaking the mortgage. That’s your exit strategy if market conditions shift.
What You Should Do
Every situation is different.
If you have strong job security, a healthy emergency fund, and you’re comfortable with payment increases of 15% to 20%, variable rates still offer savings.
If you’re stretching to afford your home, facing renewal shock, or value predictability over potential savings, fixed rates make more sense right now.
The 0.5% to 0.7% savings on variable rates today will evaporate quickly if the Bank of Canada hikes rates once or twice.
I’ve seen this movie before.
The people who sleep best at night are the ones who locked in certainty when uncertainty was high.
If you’re wondering where you stand, let’s talk. I’ll walk you through your options based on your actual situation, not a generic forecast.
Rob Jennings
Jennings & Associates – East Coast Mortgage Brokers
(709) 300-4518
www.jenningsmortgage.com