Where 1-year fixed rates sit in August 2026
A 1-year fixed locks your rate for a single 12-month term, then you renegotiate. It is the shortest fixed product most lenders advertise, and in a normal market it is the cheapest fixed term because it carries the least rate risk. This is not a normal market. The table below summarizes lowest-in-market advertised rates reported by public Canadian comparison sites on August 19, 2026.
| Term | Lowest advertised | What it is for |
|---|---|---|
| 1-year fixed | ~4.29% | Shortest fixed commitment; resets in 12 months |
| 2-year fixed | ~3.94% | Bridge to an expected lower-rate window |
| 3-year fixed | ~3.89% | Common compromise term in 2026 |
| 5-year fixed | ~3.94% | Longest mainstream payment certainty |
| 5-year variable | ~3.35% | Lowest starting rate, moves with prime |
Figures are rounded public benchmarks as of August 19, 2026 and change frequently. Lowest advertised rates typically assume an insured, high-ratio, owner-occupied purchase with strong credit and verified income — many files do not qualify for them, and 10-lender averages run higher than the lowest quoted. See current Canadian mortgage rates and the 5-year fixed, 2-year fixed and 3-year fixed pages for updated pricing.
Why the 1-year fixed costs more than the 5-year fixed right now
This is the headline story of the month, and it comes down to what each term is priced off:
- Fixed rates follow Government of Canada bond yields plus a lender spread. A 5-year fixed blends the market's view of short-term rates across five years. A 1-year fixed is priced almost entirely off the very front of the curve — the next 12 months of funding cost.
- The market now expects the Bank of Canada to hike, not cut. After the early-2026 energy shock (the U.S.–Israel conflict with Iran disrupted the Strait of Hormuz and pushed headline inflation back toward 2.8%), markets shifted from pricing cuts to pricing policy risk to the upside. The Bank has held at 2.25% since July 15, 2026, but market-implied probabilities in mid-August 2026 favoured another hold on September 2 with rising odds of increases through 2027.
That repricing shows up directly in the forecasts. WOWA's market-implied outlook (sourced from Chatham Financial and updated August 12, 2026) put the lowest 1-year fixed at about 4.29% now, 4.97% by December 2026 and 5.36% by December 2027, while the lowest 5-year fixed was about 3.94% now, 4.28% by December 2026 and 4.41% by December 2027. In plain terms: the curve is inverted at the short end because the cost of money expected in 12 months is higher than the average cost expected over five. A 1-year fixed trades at a premium precisely because the market thinks next year's rate will be worse than today's.
Who a 1-year fixed actually makes sense for
A higher short-term rate is not automatically a bad product. It can be the right tool for specific situations — and the wrong one for most others.
It can fit if you expect to exit the mortgage inside a year
- You are planning to sell and the timing is firm.
- You expect to refinance or switch for new money within 12 months.
- Your credit file or income will improve soon and you want a cleaner renewal a year from now.
- You want to make a large prepayment and would rather not be locked into a long fixed term with an interest-rate-differential penalty.
It probably does not fit if you want certainty
- You are locking in for payment stability. The 1-year fixed removes 12 months of risk, then drops you straight back into whatever the market is doing in a year — when forecasts say that could be ~5.36%.
- You believe the market is wrong and rates will fall. In that case a longer fixed at ~3.94% protects you; a 1-year fixed at 4.29% costs more now and renews into the downside you are betting on.
These are general descriptions, not advice about your file. A broker or lender can tell you which terms you actually qualify for.
1-year fixed vs 5-year variable
Both are short-term bets, so it is worth comparing them directly. As of August 19, 2026 the lowest advertised 5-year variable was about 3.35% against about 4.29% for the lowest 1-year fixed — the variable starts roughly 0.95 points cheaper.
- Variable is a discount to prime (4.45%), and prime only moves when the Bank of Canada moves. If the Bank holds (the base case for September 2, 2026), your payment does not move for the whole term.
- 1-year fixed locks the rate for 12 months, so you know exactly what you pay — but you give up the lower starting rate and you are back negotiating in a year, when the market prices the 1-year fixed near 4.97%.
The honest framing: if you expect the Bank to hold or ease, the variable is cheaper to start and keeps your option open. If you expect hikes and cannot stomach a payment that could rise, the 1-year fixed buys one year of known cost. Neither is a forecast, and nothing here recommends one over the other. See the fixed vs variable Canada guide for the fuller comparison.
See what lenders would actually quote you
Advertised 1-year fixed rates assume a best-case borrower. RateShop can put current purchase, switch, renewal and refinance options side by side using your real balance, property and timeline — so you are comparing offers, not table headlines, across 1-year, 2-year, 3-year, 5-year fixed and variable terms.
Compare mortgage ratesIf you are renewing and considering a short term
Renewal is where most 2026 volume sits, and a short term is a common renewal reflex when rates feel uncertain. Two practical points:
- Start early. Begin comparing four to six months before maturity — most lenders will hold a rate for 90 to 120 days — and check what happens if you do nothing, since automatic renewal into a posted rate is usually the most expensive outcome available.
- A 1-year renewal is a bet on next year's rate. With market pricing pointing to a higher 1-year fixed at renewal, a short term trades a known-lower longer fixed today for an unknown (and currently higher-priced) rate in 12 months. Price your payment at the fixed quote, then at a variable rate 0.50% and 1.00% higher, and pick the structure whose worst case you can carry. Current pricing and the renewal process are on the mortgage renewal rates page.
Run your real balance, rate and amortization through the mortgage payment calculator before committing to any term — on a $400,000 balance over 25 years, moving from about 4.29% to about 4.97% is on the order of $150 more a month, and that gap widens with a larger balance.
Rate disclaimer
All rates, yields and market figures on this page are general educational information gathered from public sources on or about August 19, 2026 and may be out of date, incomplete or superseded without notice. RateShop does not guarantee any rate, approval or product availability. Actual mortgage rates depend on lender criteria, credit profile, verified income, property type and value, mortgage purpose, down payment or equity, insurance status, amortization and documentation. Market-implied rate probabilities and forecasts are not forecasts and frequently prove wrong. This page does not provide personalized mortgage, legal, tax or financial advice. Speak with a licensed mortgage professional about your own situation.
Frequently asked questions
What is a 1-year fixed mortgage rate in Canada right now?
On August 19, 2026 public tables showed the lowest advertised 1-year fixed near 4.29%, versus about 3.94% for the lowest 5-year fixed and about 3.89% for the lowest 3-year fixed. The 5-year variable was lowest near 3.35%. These are benchmarks, not offers. See current Canadian mortgage rates.
Why is the 1-year fixed more expensive than the 5-year fixed in 2026?
Because markets expect the Bank of Canada to raise its policy rate from 2.25% over the next year or two rather than cut it. A 1-year fixed is priced off very short-term funding costs, which climb when hike expectations build, while a 5-year fixed averages those expectations over a longer window. WOWA's market-implied forecast (updated August 12, 2026) put the lowest 1-year fixed at 4.97% by December 2026 and about 5.36% by December 2027 — that inversion is the market, not a typo.
Who should consider a 1-year fixed mortgage in 2026?
Borrowers who expect their own situation to change within about a year (a sale, refinance, large prepayment, or a credit-file improvement) and who want to avoid a long fixed term and its interest-rate-differential penalty. Also borrowers who genuinely believe rates will fall despite current market pricing. It is not a default choice, and this page is not personalized advice.
How does a 1-year fixed compare to a 5-year variable?
Both are short-term bets. The 5-year variable (lowest near 3.35% in August 2026) starts lower than the 1-year fixed (near 4.29%) and moves with prime, which only changes when the Bank of Canada moves. The 1-year fixed locks the rate for 12 months but resets in a year. If you expect the Bank to hold or cut, variable is cheaper to start; if you expect hikes, the fixed removes 12-month repricing risk. Neither is right for everyone.
What rate will I get when my 1-year fixed comes up for renewal?
Unknown until then. Market-implied pricing (WOWA and Chatham Financial, August 12, 2026) suggested the lowest 1-year fixed could be near 4.97% at the end of 2026 and about 5.36% by the end of 2027, with the Bank of Canada policy rate expected around 2.50% to 3.25% over that window. Those are probabilities, not guarantees, and your actual renewal quote depends on your file. Run your own numbers in the mortgage payment calculator.
When is the next Bank of Canada rate announcement?
September 2, 2026. The Bank held at 2.25% on July 15, 2026 for a sixth consecutive decision, and prime has been 4.45% since October 2025. Market-implied odds in mid-August favoured another hold in September, with rising probability of increases through 2027. Expectations are not guarantees.
Sources used
- WOWA.ca: Canada Mortgage Interest Rate Forecast 2026–2031 (today's rates snapshot August 19, 2026; market-implied forecast updated August 12–13, 2026, sourced from Chatham Financial)
- Bank of Canada: Policy interest rate (2.25% held July 15, 2026; 2026 announcement schedule, next decision September 2, 2026)
- Bank of Canada: Selected bond yields (fixed-rate pricing context)