Buying in August 2026: What 3.94% Really Changes in Your Budget

We described the insured 5-year fixed crossing below 4% in our analysis of the 3.94% threshold. That leaves the question a buyer actually asks: how much does it change, in dollars, against real market prices. Here is the calculation, with every assumption stated.

The assumptions, stated first

A payment figure means nothing without its assumptions. Here are ours, to be checked against your own situation before you use them.

• 25-year amortization, monthly payments
• Semi-annual compounding, the Canadian convention for fixed-rate mortgages
• Down payment of 20% of the purchase price
• Amounts in principal and interest only: municipal and school taxes, home insurance, condo fees and heating are on top
• Rates used are market rates at publication: 3.94% for the insured 5-year fixed, 3.45% for the 5-year variable, and 4.09% recorded on July 23, 2026 for comparison

One caveat up front: 3.94% is an insured rate, which implies a down payment below 20%. We apply it here to a 20% down payment in order to isolate the effect of the rate without bringing an insurance premium into the calculation. What these figures measure is therefore the size of a rate gap, not a financing offer.

The base reference: per $100,000 borrowed

This is the most useful number to remember, because it scales to any amount. Over 25 years, for each $100,000 borrowed, in principal and interest:

• at 4.09%: roughly $531 per month
• at 3.94%: roughly $523 per month
• at 3.45%: roughly $497 per month

Two gaps follow. Moving from 4.09% to 3.94% is worth roughly $8 per month per $100,000. The gap between the fixed at 3.94% and the variable at 3.45% is worth roughly $26 per month on the same tranche, more than three times as much.

In other words, the choice between fixed and variable currently weighs far more on the monthly payment than the drop in the fixed rate itself. That is a finding from the arithmetic, not a recommendation.

Applied to the two Q2 medians

The Q2 2026 single-family medians are $523,250 across Quebec and $645,000 in the Montreal metropolitan area. With 20% down, that gives loans of $418,600 and $516,000.

Provincial median, $418,600 loan: roughly $2,222 per month at 4.09%, roughly $2,188 at 3.94%, roughly $2,079 at 3.45%. The drop in the fixed rate is therefore worth about $34 per month, close to $409 over a year.

Metropolitan median, $516,000 loan: roughly $2,739 per month at 4.09%, roughly $2,698 at 3.94%, roughly $2,563 at 3.45%. Here the drop in the fixed rate is worth about $42 per month, close to $504 over a year.

These amounts are rounded to the dollar and cover principal and interest only. Add taxes, insurance and heating to reach the real cost of occupancy, which is the only figure relevant to a household budget.

What the calculation says, and what it does not

The honest finding is that fifteen basis points do not transform a buying capacity. About $34 per month on the provincial median is real, it is welcome, and it is not what brings a household into a budget it was excluded from in June.

Set that against price movement: the provincial single-family median rose 5% year over year, and the metropolitan median 3%. On these amounts, the price increase comfortably exceeds the saving from the rate drop. Buying power did not increase; it was partially defended.

The qualifying rate is not the contract rate

This is the distinction online calculators skip most often, and it changes everything at approval. A Canadian lender does not test your repayment capacity at the rate written into your contract: it tests it at a higher qualifying rate, set by regulation.

So you pay 3.94%, but you are approved on a higher rate. A payment calculated at 3.94% does not determine the amount you will be granted: it describes what you will repay if you are granted it. The two exercises are separate, and only a lender or mortgage broker can run the second with your real numbers.

One last piece of context: prime stands at 4.45% and the Bank of Canada policy rate at 2.25%, unchanged through six announcements, with the next due September 2, 2026. Neither is the rate you will borrow at, but the first anchors home equity lines of credit and the second steers the variable.

Fixed or variable: what we will not settle

The $26 per month per $100,000 gap favours variable at signing. It is paid for in uncertainty: variable follows the policy rate, frozen through six announcements and capable of moving either way on September 2. The fixed buys five years of stability, more expensive at the start.

We recommend neither. That choice depends on the stability of your income, your holding horizon, your monthly budget margin and your tolerance for watching a payment move. Those are parameters an article does not know and a mortgage advisor needs to examine with you.

What we can contribute sits upstream of financing: knowing what the property you are targeting is actually worth, rather than reasoning from a provincial median that is nobody's price.