Interest Rates & Mortgage Rates Explained: What They Are in Canada (2026 Guide)
What Are Interest Rates and Mortgage Rates?
A mortgage rate is the annual interest percentage a lender charges on your home loan. It's one type of interest rate, set on top of broader benchmark rates. "Interest rates mortgage rates" and "home loan interest rates" all describe the same thing: the price of borrowing, paid in every payment alongside principal.
In Canada, the Bank of Canada's overnight rate, lender prime rates and bond yields shape that price. The overnight rate influences each lender's prime rate, and prime has historically sat 2.20 percentage points above it. A 0.25-point Bank of Canada move normally shifts prime by 0.25 points. Prime moves variable-rate mortgages directly. Fixed rates follow Government of Canada bond yields, mainly the 5-year yield. For today's numbers, check the Bank of Canada's website for the latest overnight rate and next announcement date, and see current Ontario mortgage interest rates.
Rates are quoted as annual figures. Canadian fixed-rate mortgages compound semi-annually by law, which differs from the monthly compounding common in the US. Interest accrues on the outstanding balance, so how payment frequency affects total interest matters. Accelerated bi-weekly payments, for example, cut the balance faster.
How Mortgage Rates Work in Canada: Fixed, Variable, Terms and Payments
Term vs. amortization
In Canada, a "term" is how long your rate is locked in (usually 5 years). The "amortization" is how long you take to repay the whole loan (25 or 30 years). The US "30-year fixed" combines both ideas, which is why Freddie Mac's weekly survey of US rates isn't a direct comparison for Canadian borrowers. Canadian mortgages are renewed at the end of each term at the then-current rates.
Fixed vs. variable
A fixed rate is locked for the term and priced off bond yields. A variable rate floats with the lender's prime. There are two variable styles. With an adjustable-rate mortgage, your payment changes when prime changes. With a standard variable, your payment stays put and the split between principal and interest shifts instead. Many Ontario lenders now offer both.
We don't publish a rate snapshot table here because rates change often and differ by lender. Ask us for a dated quote, or compare lender and monoline rate sheets directly.
What a $400,000 mortgage costs
The table below shows approximate monthly payments on a $400,000 mortgage with semi-annual compounding.
| Rate | 25-year amortization | 30-year amortization |
|---|---|---|
| 3% | $1,893 | $1,682 |
| 4% | $2,104 | $1,902 |
| 5% | $2,326 | $2,135 |
| 6% | $2,559 | $2,377 |
Going from 4% to 5% adds about $222 a month on a 25-year amortization. Stretching to 30 years lowers the payment by about $200 a month at 5%, but it costs substantially more interest over the life of the loan.
30-year amortizations and the stress test
Insured mortgages (under 20% down) became eligible for 30-year amortizations for first-time buyers and buyers of new builds from December 15, 2024, and eligibility was widened in December 2025. Federal rules can change, so confirm the current criteria before you plan around them. Uninsured mortgages can already go to 30 years at lender discretion.
You also have to pass the stress test. Borrowers must qualify at the greater of their contract rate plus 2 percentage points or 5.25%. The same rule applies to many switches and refinances, with some exceptions on straight switches of insured mortgages. If you're unsure which category you're in, what a conventional mortgage is is a useful starting point.
Why your rate differs from someone else's
Insured mortgages often get the lowest rates because default insurance covers the lender's risk. Uninsured and refinance rates are usually a bit higher, and rental or investment properties are typically priced higher still. Other factors include:
- Credit score
- Down payment or equity
- Property type
- Term length
- Lender type (big banks, credit unions, monolines or private lenders)
Private lenders charge notably more but serve credit-challenged or complex files. Self-employed borrowers can access competitive rates with the right documentation, or use alternative lenders at a premium if income is hard to verify.
What a good rate looks like
A good rate sits near the best discounted rates on current lender and monoline sheets, well below the bank's posted rate. Posted rates are mostly used for penalty calculations and are rarely what well-qualified borrowers actually pay.
Other borrowing and investment properties
HELOC rates are usually variable and priced at prime plus a spread. They move with every prime change, unlike a fixed mortgage rate. Here's how HELOC rates differ from mortgage rates.
For rental purchases, small differences add up. On a $400,000 mortgage, a one-point gap (5% vs. 6%) is about $233 a month on a 25-year amortization. For an investor with a Southern Ontario rental, that can erase a meaningful part of monthly cash flow. See how rates affect investment property mortgages in Southern Ontario.
Comparing offers
Look beyond the rate. Check prepayment privileges, how the penalty is calculated (three months' interest vs. interest rate differential), portability and lender reputation. Here's how to compare mortgage offers properly.
Mortgage Rate FAQs
What is a mortgage interest rate right now?
As of 25 October 2026, rates differ by lender, down payment, credit and whether the mortgage is insured. Check current lender and monoline rate sheets, or ask a broker to quote your own file. Variable rates follow prime, which follows the Bank of Canada overnight rate. Fixed rates follow bond yields.
How much is a $400,000 mortgage payment for 30 years?
With semi-annual compounding and monthly payments, a $400,000 mortgage over 30 years costs roughly $1,682 at 3%, $1,902 at 4%, $2,135 at 5% and $2,377 at 6%. A 25-year amortization at 5% is about $2,326. Longer amortizations lower the payment but increase total interest. 30-year amortizations are available on insured mortgages for eligible first-time buyers and new builds, and at lender discretion on uninsured mortgages.
Will mortgage rates be 3% again?
It's possible but not likely soon, and nobody can promise it. The pandemic-era lows of roughly 1.5% to 2% for 5-year fixed rates came with an overnight rate of 0.25%. Today's rates depend on the overnight rate, bond yields and inflation. Variable rates could reach 3% if the Bank of Canada keeps cutting, while fixed rates also depend on bond yields. Plan around payments you can afford today.
What is a good 30 year mortgage rate right now?
In Canada, mortgages are quoted by term (usually 5 years) with a 25- or 30-year amortization, not as a "30-year fixed". A good rate is one at or near the lowest discounted rates currently published for your mortgage type (insured, uninsured or refinance) and well below the bank's posted rate. Compare offers on your own file, since credit, down payment and lender type all matter.
Where can I get the lowest mortgage interest rate?
Lowest pricing often comes from comparing several lender types: banks, credit unions and monolines. A mortgage broker can shop these at once and negotiate for you, and may hold a rate for up to several months. Compare more than the rate, since prepayment options and penalties matter too. See brokers vs. banks on pricing.
What happens to my rate when my mortgage term ends?
At renewal you take the lender's offer at current rates, switch lenders or refinance. Your new rate reflects the market at that time, not your old rate, so your payment may rise or fall. Start shopping 120 or more days before the maturity date. Here's mortgage renewal vs. refinancing explained.
When should I refinance to get a different interest rate?
Consider refinancing if your current rate is well above market, you need to access equity, or you want to consolidate higher-interest debt. Weigh the penalty and legal costs against the interest savings. Refinance rates are often slightly higher than renewal or purchase rates. Review current refinance mortgage rates in Ontario and tips on finding the best refinance rate.
How do rates affect first-time buyers?
A higher rate means a higher payment and a smaller price range, and the stress test makes that effect stronger at qualification. Our first-time home buyer mortgage advice covers affordability in more detail.
Can self-employed borrowers still get competitive mortgage rates?
Yes, with the right documentation, such as tax returns and notices of assessment, many self-employed borrowers qualify at prime-lender rates. Those who can't fully verify income may use alternative lenders at higher rates, often as a short-term step. Read more on qualifying for a mortgage when self-employed.
Rates differ by file, so verify with a broker for your own situation.
Getting a Rate That Fits Your Situation
A broker with access to banks, credit unions, monolines and private lenders can compare pricing and negotiate for you, often with a rate hold of 90 to 120 days while you shop. Support doesn't stop at funding: we help at renewal and can review advanced strategies such as the Smith Manoeuvre™ when they suit your goals.
If you'd like a no-pressure rate review, reach out to Burns Mortgages. We update this page with dated rate snapshots each month.