Why does your mortgage rate rise even if the Bank of Canada doesn’t move (2026)
Last September 2, the Bank of Canada announced that it would keep its overnight rate at 2.25%. Good news in appearance... except that several borrowers are pleasantly surprised to find that fixed mortgage rates offered by lenders are on the rise. If you’re shopping for a renewal or a new loan these days, here’s why your rate doesn’t necessarily follow the central bank’s decisions, and what you can do to protect yourself.
The overnight rate and the fixed rate are not the same thing
It’s one of the most common confusions among my clients, and it’s entirely legitimate. The Bank of Canada’s overnight rate directly influences variable rates and lines of credit, since financial institutions use it as a reference point for their prime rate. Fixed rates, however, follow an entirely different logic: they are set based on the five-year Government of Canada bond yield, a market influenced by investors’ expectations regarding inflation, economic growth, and future decisions by the Bank of Canada itself. In other words, even when the overnight rate remains stable, if bond markets anticipate more persistent inflation or a more resilient economy than expected, bond yields rise and fixed rates follow.
Concrete result: at the moment, 5-year fixed rates are around 4.44% to 4.59% at most lenders, while the variable rate remains more favorable for some profiles, around 3.50% to 3.85% depending on the institution and the loan’s qualifying. These figures move quickly from week to week: always check the daily rates before making a decision.
Why it matters if you renew soon
Many homeowners took out their mortgage between 2020 and 2022, at historically low rates. Many of them mature this year or in 2027, and risk a large payment shock at renewal. If that’s you, waiting can be costly: the closer you get to the due date without planning, the fewer options you have to smooth the transition.
What you can do right now
The good news is that there are tools to protect yourself while you shop. A rate hold, offered by most lenders, allows you to lock in a rate for a period of 90 to 130 days, even if rates rise before signing, while still allowing you to benefit from a drop if it occurs in the meantime. It’s a simple strategy, usually free, and particularly useful in a volatile rate environment like this.
If your renewal is approaching, or if you’re currently shopping for a property, now is the right time to compare your options before rates move further. Don’t hesitate to contact me: together, we’ll review your situation and determine the best strategy for your next financing.
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