Will Interest rates go up or down next year
Monday, Aug 03, 2026
For Canada, the most likely answer is slightly up or mostly flat next year, but with a lot of uncertainty.
The Bank of Canada held its policy rate at 2.25% as of July 2026, signalling a period of relative stability. With inflation gradually easing back toward the 2% target, the conditions for dramatic rate swings are limited. However, the outlook remains sensitive to economic performance — both domestically and globally. Understanding the likely rate environment heading into 2027 is essential for making informed home buying and selling decisions.
Global uncertainty and the ongoing conflict in the Middle East continue to add volatility to the outlook. Oil prices remain elevated, with sharp swings driven by geopolitical developments—signs of a ceasefire typically lead to steep price drops, while renewed tension or strikes push prices higher. This matters because oil affects the cost of everyday goods and consumables, which ultimately feeds into inflation.
Compared to the strong performance of the U.S. economy, Canada is showing signs of softening. The Canadian dollar has been depreciating relative to the U.S. dollar, making imports more expensive and contributing to imported inflation. If inflation remains persistent, the risk of another rate hike cannot be ruled out.
Here’s the summary:
- The Bank of Canada held its policy rate at 2.25% in July 2026.
- Recent outlooks suggest inflation is easing toward target, which supports stability.
- If growth strengthens and inflation stays firm, rates could edge higher.
- If the economy softens more than expected, rates could fall instead.
Bottom line: I’d expect no big move, with a small upward bias in 2027.
Sure — for home buying / selling strategy, interest rates matter in a few big ways:
If you’re buying
- Lower rates = more borrowing power. Your monthly payment drops, so you may qualify for a higher mortgage.
- Higher rates = tighter budget. Even a small rate increase can reduce what you can comfortably afford.
- Best move: get pre-approved early and stress-test your budget so you know your ceiling before making offers.
If you’re selling
- Lower rates usually bring more buyers. More people can qualify, which can boost demand.
- Higher rates can slow the market. Buyers may be more cautious, and homes can take longer to sell.
- Best move: price strategically and make sure your listing stands out if buyers are rate-sensitive.
If you’re both buying and selling
- If rates are expected to fall: waiting may help you buy cheaper, but you might face more competition later.
- If rates are expected to rise: buying sooner may protect your affordability, but you may pay a bit more upfront.
- Best move: focus on your personal timeline, not just rate predictions.
Practical takeaway
For a move next year, the key question is: Will the payment still work if rates don’t improve much?
