Current Mortgage Refinance Rates in Canada
Mortgage refinance rate update: May 2026
May is a confusing time to be renewing a mortgage in Canada. There’s an awful lot of rate uncertainty to deal with.
The Bank of Canada holding its overnight rate at 2.25% on April 29, 2026, means variable refinance rates will stay at their current levels until at least June 10, when the Bank makes its next overnight rate decision.
Beyond that, where variables go is hard to predict. If the war in Iran sends inflation soaring, the Bank will be forced to increase the overnight rate. A rate hike will trigger higher variable refinance rates.
Fixed refinance rates are even less predictable.
Government bond yields, which lenders use to price their fixed rates, remain elevated due to the war’s impact on oil prices and inflation. Lenders already increased their fixed refinance rates in response to soaring yields in March and April.
The war could shift from stalemate to active conflict at any minute. If hostilities further damage energy infrastructure or clog the global supply chain, yields could spike and take fixed rates with them.
Refinancing a mortgage in times like these requires speaking to your lender and understanding the implications of any action you might take. Refinance rates are fairly high, so other equity-tapping options might be worth considering.
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Why are mortgage refinance rates higher?
There are various theories around why mortgage refinance rates are typically higher than purchase mortgage rates.
One is that lenders assume greater risk when they extend homeowners more credit over a longer period of time. If you refinance your mortgage, borrow against your home equity and opt for a longer amortization period, for example, it adds extra time during which you might fail to make good on your mortgage payments.
Another possible explanation is that refinances can result in lower profits for lenders. Let’s say you agree to a five-year fixed rate mortgage at 5% but are able to refinance at 3% after two years. The result is three years of savings for you, but three years of reduced earnings for your lender. Charging a higher rate on your refinance mitigates these losses. (Hefty prepayment penalties help, too.)
How to get the best mortgage refinance rate
Refinancing a mortgage requires applying for a new home loan. To be approved, the lender will put your finances under the microscope again. Before offering you the best refinance rate, your lender will want to see:
Debt service ratios well below the limits laid out by the Canada Mortgage and Housing Corporation and other mortgage insurance providers. These limits include a gross debt service ratio of 39% and a total debt service ratio of 44%
The highest credit score you can manage. A score of 700 or higher, for example, will demonstrate creditworthiness to lenders.
On-time mortgage payments since becoming a homeowner. Missed mortgage payments are the reddest of flags.
Your current lender may not approve a refinance if your credit score has decreased or you’re experiencing debt issues. That doesn’t mean you’re out of options. There are plenty of B lenders that specialize in bad credit mortgages where you may be able to get refinanced.
Other mortgage refinance costs to consider
With all things mortgage-related, there’s more to think about than just the interest rate you’re offered. That’s especially true when it comes to refinancing, where other costs can include:
Prepayment penalties. Refinancing before the end of your mortgage term means breaking your mortgage contract, paying off your loan in full ahead of time and paying what can be a hefty penalty. How much you pay will depend on your interest rate type and how your lender calculates your penalty amount.
A home appraisal. Your lender will use a professional appraisal to determine your home’s value before deciding how much you can borrow against it.
Legal fees. As with your original mortgage, a real estate lawyer will be required to facilitate the transaction.
Mortgage discharge fees. You may have to pay to discharge your mortgage if you refinance with a new lender.
An opportunity to lock in at a lower rate will always sound enticing, but the benefits have to be weighed against the total cost to ensure you’re making the right long-term decision for your household.
Frequently asked questions
What are current interest rates for refinancing?
As of May 2026, mortgage refinance rates are uncomfortably high. Three- and five-year fixed rates are generally around 4.8%, while variable rates are typically 4% or higher.
Should I refinance to save 1% on my mortgage rate?
Shaving 1% off of your mortgage rate will reduce the interest you pay over the rest of your term. Whether you save money overall will depend on how much your prepayment penalties, legal fees and home appraisal cost you.
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Clay Jarvis
Clay Jarvis
Clay Jarvis