Updated October 14, 2026. Market figures as of mid-October. Next Bank of Canada decision: October 28.
The Bank of Canada has not raised its policy rate in 2026. It has sat at 2.25% since October 29, 2025, and the bank held it there again on September 2. Yet since early September, all six big banks have raised their fixed mortgage rates, some terms by as much as half a percentage point. A homeowner renewing this fall is being offered a noticeably worse deal than a neighbour who renewed in the summer.
That looks like banks moving on their own, but fixed mortgage rates in Canada were never set by the Bank of Canada in the first place. They follow the bond market, and the bond market has been repricing the whole world’s interest rates since an oil shock began in late February. This article follows the money from the Strait of Hormuz to your renewal letter, with the data at each step.
Two different rates, two different bosses
Canadian mortgages come in two main kinds, and each takes its cue from a different place.
Variable rate
Fixed rate
When people say “rates are going up but the Bank of Canada hasn’t moved,” they are watching the wrong lane. The policy rate drives variable mortgages. Fixed mortgages answer to bond investors, and bond investors look ahead. They are not waiting for the Bank of Canada to act. They are betting on what it will do next, and on what every other central bank is doing now.
What the banks have done since September
| Bank | What changed |
|---|---|
| TD and RBC | Set the pace from early September, raising several terms by as much as 0.40 to 0.50 points in total |
| CIBC and TD | Raised select 3- and 5-year fixed rates by 0.20 points on September 29, completing a Big Six sweep |
| RBC | Raised 1- to 5-year fixed rates by 0.10 to 0.20 points in early October and trimmed its discount on new 5-year variable mortgages |
| BMO | On October 7: special 3-year fixed to 4.94%, standard 5-year fixed to 5.14%, insured 5-year to 4.99% |
| Scotiabank | 2-year fixed to 5.14% |
| National Bank | Mostly 0.10 to 0.30 points across terms |
Other lenders moved too, by 0.05 to 0.40 points. These are the banks’ own advertised rates. Broker channels price separately and are often lower, but they have been rising for the same reason.
Why bond yields jumped: five forces
Canada’s 5-year bond yield was about 2.6% in late February. It hit a 52-week high of 3.729% on September 28 and was around 3.62% in mid-October, roughly 0.9 points higher than a year ago. Five things pushed it there.
1. An oil shock that brought inflation back
The war involving Iran that began in late February disrupted shipping through the Strait of Hormuz, one of the world’s main oil routes. Brent crude crossed US$100 a barrel again on September 9 after renewed U.S.-Iran exchanges of fire. The Bank of Canada estimates oil is about US$40 a barrel above where it would otherwise be.
In Canada, gasoline prices were up 22.8% from a year earlier in August, and headline inflation was 3.0% for a second straight month, above the 2% target. Bond investors demand higher yields when they expect inflation to eat into what they are paid back.
2. Other central banks started raising rates
Canada has held, but its peers have not:
- The European Central Bank raised rates in June, its first move in three years, and again on September 10, taking its deposit rate to 2.5%. Eurozone inflation hit 3.3% in August.
- The U.S. Federal Reserve raised rates by a quarter point on September 16, starting a new tightening cycle.
- The Bank of Japan raised rates on September 18, three months after its previous increase.
When the world’s biggest central banks tighten, global bond yields rise together. Canadian yields cannot drift far from them, because investors can move money across borders in seconds.
3. U.S. yields pull Canada’s along
TD Economics calculated in September that the U.S. 10-year yield had risen about 0.80 points since its late-February low, and Canada’s about 0.60 points. Two-year yields rose about 1.00 point in the U.S. and 0.70 in Canada. Canada moved less, but it moved in the same direction. TD says the rise in yields across the G7 partly mirrors the selloff in U.S. Treasuries, and its economists have pointed to imported U.S. bond yields as a key reason Canadian rates are higher.
4. Heavy government borrowing and a higher “term premium”
Governments around the world are borrowing heavily, and central banks are no longer big buyers of their bonds. Investors now ask for extra yield to lock money up for longer, known as the term premium. TD estimates the U.S. 10-year term premium at roughly 0.80 to 1.00 points. Canada’s smaller deficits have kept its yields from rising as much as in Japan or the U.K., but Canada is still paying part of the global price.
5. Markets now expect the Bank of Canada to hike
Bond yields reflect where investors think the policy rate is going, not where it is. On September 21, Governor Tiff Macklem said the bank does not want to “be too slow to respond if inflationary pressures are becoming more persistent,” and warned that oil near US$100 could require a policy adjustment. By early October, swap markets were pricing about one full percentage point of Bank of Canada hikes over the next 12 months. A 5-year bond yield is roughly the average of expected short-term rates over five years, plus a premium. When expected rates rise, the 5-year yield rises with them, months before the bank acts.
The timeline, step by step
| Date | What happened |
|---|---|
| Oct. 29, 2025 | Bank of Canada cuts to 2.25%. It has not changed since. |
| Late Feb. 2026 | War involving Iran begins. Canada’s 5-year yield is about 2.6%. |
| June 11 | ECB raises rates for the first time in three years. |
| Sept. 2 | Bank of Canada holds at 2.25% for the seventh straight decision and flags upside risk to inflation. |
| Sept. 9 to 10 | Brent crude back above US$100. ECB raises again, to 2.5%. |
| Sept. 14 | Canada’s August inflation: 3.0% headline, gasoline up 22.8%, core measures near 2%. |
| Sept. 16 to 18 | U.S. Federal Reserve and Bank of Japan raise rates. Canada’s 10-year yield reaches 3.87%. |
| Sept. 21 | Macklem says the bank will not be “too slow to respond.” |
| Sept. 28 | Canada’s 5-year yield hits a 52-week high of 3.729%. |
| Sept. 29 | CIBC and TD raise fixed rates 0.20 points, completing the Big Six sweep. |
| Oct. 6 to 7 | RBC and BMO raise again. BMO’s standard 5-year fixed reaches 5.14%. |
| Oct. 19 | September inflation data due. |
| Oct. 28 | Next Bank of Canada decision. |
How a bank turns a bond yield into your rate
A bank lending you money for five years at a fixed rate needs five-year money of its own. It raises that money through GICs, deposits and bonds, all of which are priced off Government of Canada yields plus the bank’s own credit spread. On top of its funding cost, the bank adds a margin to cover the risk you default, the risk you break the mortgage early, the capital regulators require it to hold, and its profit. That gap between the bond yield and your rate is the spread.
With the 5-year yield around 3.62% and BMO’s standard 5-year fixed at 5.14%, the spread on that product is about 1.5 points. On BMO’s insured 5-year at 4.99%, it is about 1.4 points (Local Toronto calculations). Spreads move a little, but most of the 2026 increase in fixed rates came straight from the bond market, not from banks widening their margins.
Why variable rates are moving too
Variable rates follow prime, and prime has not changed. But the discount banks offer off prime is their choice, and it is shrinking. RBC trimmed its 5-year variable discount in early October.
The reason is demand. Mortgage broker Clinton Wilkins told Canadian Mortgage Trends that more than 60% of borrowers are now choosing variable, against a long history of about 60% picking a 5-year fixed. With some brokers, he said, close to 90% are going variable. Some variable offers are more than a full point below comparable fixed rates. When everyone wants the same product, lenders have less reason to discount it, especially when markets are betting prime will rise.
There is also a qualification quirk. Mortgage brokers note that under federal stress-test rules, some borrowers can qualify for a variable mortgage but not a fixed one for the same amount, because the fixed rate is now so much higher. That pushes more people toward variable, whatever their view on rates.
Our guide to fixed or variable at renewal in 2026 walks through that choice.
What it costs at renewal
CMHC projects about 1.15 million Canadian mortgages will renew in 2026 and about 940,000 in 2027. For a $400,000 balance with 22 years left:
| Rate | Monthly payment | vs 4.29% |
|---|---|---|
| 4.29% | $2,335 | n/a |
| 4.49% | $2,378 | +$43 |
| 4.74% | $2,432 | +$97 |
| 4.99% | $2,487 | +$152 |
| 5.14% | $2,521 | +$186 |
| 5.49% | $2,599 | +$264 |
A 0.50-point rise on that balance costs about $110 a month, or roughly $6,600 over a five-year term. Try your own numbers:
Will rates keep rising?
Nobody knows, and the experts disagree sharply.
- The case for higher: markets price about four quarter-point Bank of Canada hikes by mid-2027, according to TD Economics. Some brokers expect a hike on October 28 or December 9, and a big-bank 5-year fixed starting with a 5 has already arrived.
- The case for a pause: Canada’s core inflation is close to target, with the trimmed-mean measure at 1.9% and the median at 2.0% in August. TD’s economists call hikes “premature” given weak growth and slack in the job market, and expect the bank to hold for the rest of 2026. Others argue that higher rates cannot fix an oil supply shock.
- Forecasts for the bond yield itself point lower, not higher. Trading Economics projects the 5-year yield at about 3.5% by year-end and about 3.3% in 12 months. If that happens, fixed rates would ease, slowly.
Two dates will settle a lot: September inflation on October 19 and the Bank of Canada decision on October 28. Read our October 28 rate decision preview.
What to do if you renew in the next six months
- Start now, not at the 21-day notice. Federally regulated lenders must send a renewal notice at least 21 days before your term ends. That is the legal minimum, not a planning window.
- Get a rate hold. Many lenders will hold a rate for several months. If rates rise, you keep the lower one. If they fall, ask whether you get the lower rate.
- Shop beyond your bank. Since late 2024, uninsured borrowers can switch lenders at renewal without passing the stress test again, as long as the loan amount and amortization stay the same. Get at least one broker quote.
- Compare terms, not just rates. Shorter fixed terms and variable rates are priced differently right now. A 3-year fixed or a variable may suit you if you expect rates to ease, but only if your budget can handle increases.
- Stress-test your budget. Work out your payment at one point above your quote. If that breaks your budget, a fixed rate’s certainty may be worth the extra cost.
- Buying a home? A higher rate lowers what you qualify for. Our mortgage payment calculator shows the effect, and the GTA market data page shows what homes are selling for.
Questions about rising mortgage rates
Why are mortgage rates going up if the Bank of Canada hasn’t raised rates?
Fixed mortgage rates follow Government of Canada bond yields, not the Bank of Canada’s policy rate. The 5-year bond yield has risen from about 2.6% in late February to around 3.6%, driven by higher oil prices, rate hikes by other central banks, rising U.S. yields and market bets that the Bank of Canada will hike.
What is the Bank of Canada’s interest rate now?
2.25%. It has been unchanged since October 29, 2025. The next decision is October 28, 2026.
Are variable mortgage rates going up too?
Prime has not changed, so existing variable rates are the same. But some banks are offering smaller discounts on new variable mortgages because demand for variable has surged.
Will fixed mortgage rates come down?
Only if bond yields fall. That depends mostly on oil prices and inflation. Some forecasts expect the 5-year yield to ease over the next year, but markets are also pricing Bank of Canada hikes. Nobody can be sure.
Should I lock in a rate now?
If you renew or buy in the next few months, a rate hold protects you if rates rise further and costs nothing at most lenders. Whether to choose fixed or variable depends on your budget and how much payment risk you can handle.
Sources
- Bank of Canada, policy rate announcements, October 29, 2025 and September 2, 2026; Governor Tiff Macklem speech, September 21, 2026, as reported by Money.ca and Yahoo Finance Canada.
- Statistics Canada, Consumer Price Index, August 2026, as reported by Trading Economics.
- Money.ca, “Canada’s big six banks hike fixed mortgage rates by up to 0.5 percentage points in five weeks,” October 11, 2026.
- Yahoo Finance Canada, “CIBC and TD raise fixed mortgage rates by 20 basis points,” October 5, 2026.
- Canadian Mortgage Trends, “Fixed mortgage rates continue to climb as borrowers weigh the variable discount,” October 1, 2026.
- TD Economics, “Bond Yields: Higher for Longer and for Fundamental Reasons,” Vikram Rai, September 10, 2026.
- Euronews, ECB decision, September 10, 2026; KPMG, central bank scanner, September 18, 2026.
- Trading Economics, Canada 5-year bond yield, October 14, 2026.
This article is general information, not financial advice. Mortgage rates change daily and differ by lender, term and borrower. Confirm current rates with your lender or a licensed mortgage professional. HomeLife Landmark Realty Inc., Brokerage.