Canada’s 2025 Federal Budget is 493 pages long. Ontario’s Fall Economic Statement adds another 220. That’s over 700 pages of government talk — and I actually read them.
Why? Because buried in all that fine print are the clues to what will happen to your mortgage, your renewal, and your buying power in 2026.
Most of the headlines focus on “record deficits.” But the real story is how those decisions shape the money you borrow and the home you live in.
1️⃣ The $78-Billion Deficit — and Why It Matters
Ottawa is spending big again — a $78-billion deficit (Budget 2025, p. 38).
That means the federal government will borrow a lot more money.
Here’s why you should care:
- When Ottawa borrows, it issues Government of Canada bonds.
- More bonds = more supply = higher bond yields.
- And bond yields are what your fixed mortgage rate is built on.
So even though inflation is cooling, the deficit keeps rates from dropping quickly.
Think of it like this: Ottawa borrows first — and we all pay the interest later.
2️⃣ Ottawa’s Forecast — Slow and Steady
In Annex 1 (Budget p. 412), the government expects five-year bond yields to average 3.3 % in 2026, just below 2025’s 3.5 %.
That points to five-year fixed mortgage rates around 4.8–5.1 %.
Translation: no crash, no spike — just stability.
And that’s actually a good thing.
It gives you time to plan, not panic.
3️⃣ The Bank of Canada and the U.S. Fed — The Slow Dance
- Bank of Canada rate: 2.25 %, on hold.
- U.S. Fed rate: 4.75 %, also holding.
Canada can’t cut rates too fast or the dollar could fall.
So, the most likely path? Small cuts in mid-to-late 2026.
Good news: no wild swings.
Bad news: no quick drop to pre-pandemic rates.
This is a time for smart planning, not wishful thinking.
4️⃣ Ontario’s Economic Update — A Real-World View
The 2025 Ontario Fall Economic Statement (A Plan to Protect Ontario) shows the province slowing but stable:
- GDP growth: 0.8 % (2025) → 0.9 % (2026)
- Deficit: $13.5 B (2025–26)
- Debt-to-GDP: stable
- 8 % HST removed for first-time buyers of new homes under $1 M
- Municipal Housing Infrastructure Fund: now $4 B
- Infrastructure plan: $201 B over 10 years
Ontario’s economy isn’t booming — but it’s holding up.
Jobs remain solid, people keep moving here, and housing demand stays healthy.
5️⃣ Housing and Affordability — Governments Still Spending
The Federal National Housing Accelerator Fund got a $7 B boost. Ontario added $4 B to help towns build faster. Plus, the new HST rebate saves first-time buyers up to $80 000.
That means the housing market will stay active, not collapse.
More support equals more confidence.
6️⃣ Your 2026 Mortgage Game Plan
Situation | What’s Happening | Smart Move |
🔁 Renewing in 2026 | Rates steady ≈ 4.8–5.1 % | Shop early (120 days out). Consider a 3-year fixed or hybrid. |
💰 Refinancing | Lenders competing as bond yields stabilize | Consolidate debt before spring 2026. |
🏠 Buying | Prices flat, rebates growing | Lock your pre-approval and use rebates now. |
🏘 Investors | Strong rent demand, steady rates | Plan long-term, stress-test at 5 %. |
7️⃣ Quick Forecast Snapshot
- 5-year bond yield ≈ 3.3 % (2026)
- Variable rates down 0.25–0.5 % by late 2026
- Ontario GDP +0.9 % (2026 projected)
- Housing starts +2–3 % (under population growth)
Bottom line → Gradual relief and balanced markets.
8️⃣ Three Smart Moves Right Now
- Check your renewal date. You can lock 120 days out.
- Run two rate scenarios. Flat vs -0.25 % — see the impact.
- Stay flexible. Shorter terms or blend-to-extend options keep you nimble.
9️⃣ The Takeaway
Two budgets. 700 pages. One message: stability is your friend.
Plan ahead while others wait for a miracle rate drop.
This is your window to get ahead of 2026.
📞 Let’s chat about how these numbers fit your mortgage plan.
Stuart....
Stuart Lessels
Your “Go To” Mortgage Broker for Georgian Bay and Beyond
📧 stuart@housenow.ca 📞 (705) 445-1234
FSRA #12487 | Mortgage Alliance — Enrich Mortgage Group Ontario