The Bank of Canada just hit pause again, holding its rate for the seventh consecutive time. The overnight rate remains at 2.25%, which is what mortgage lenders use to set their prime rate, which will remain at 4.45%.
So, what does this mean for your mortgage?
It means that floating rate products such as variable-rate mortgages and HELOCs will remain unchanged. But it does not mean that fixed rates will remain unchanged. In fact, I wouldn’t get too comfortable if you’re shopping for a fixed rate mortgage and have not yet locked in a rate.
How the Overnight Rate Affects Your Mortgage
Think of the Bank of Canada’s overnight rate as the economy’s short-term steering wheel.
When the Bank changes it, commercial banks generally adjust their prime rate accordingly. The prime rate is used as a reference point for variable-rate mortgages, HELOCs (home equity lines of credit) and other borrowing products.
The current relationship looks roughly like this:
- Overnight rate: 2.25%
- prime rate: approximately 4.45%
- Variable mortgage rate: prime rate plus or minus a lender-specific discount
For example, if your mortgage is priced at prime minus 1.05%, your rate would be approximately 3.40% while prime remains at 4.45%.
Banks decide how they price their prime rate, which is generally unanimous among mortgage lenders. Just keep in mind that some lenders, namely TD Bank, will have a separate ‘mortgage prime rate’, which is 0.15% higher than their ‘regular’ prime rate, which is what is used by virtually all other lenders. If the prime rate is 4.45%, as it is right now, TD’s mortgage prime rate will be 4.60%.
This is why you can’t always go by the discount off prime alone. Always look at the rate itself, not just the discount.
To make it even more confusing, they will still use the same prime rate as other lenders for their HELOCs, or variable-rate mortgages with HELOCs attached (their FlexLine product). It’s only on their stand-alone mortgages where the inflated prime rate is used.
This is just one of three important things you need to know before choosing a variable rate, which I outline in detail in my blog on Why Variable Rate Mortgages Can Be Misleading
Upward Pressure is Back on Fixed Mortgage Rates
Government of Canada bond yields have been trending upwards since late June and have reached their highest point since May 2024. The last time yields were this high, the lowest 5-year fixed rates were sitting in the high 4% to low 5% range.
At the time of writing, the 5-year bond yield is 3.42%. As mortgage lenders typically look for a spread of 1-2% above the bond yield, this implies that fixed mortgage rates should be in the range of 4.42% to 5.42%. Not surprisingly, that range lines up with where rates were the last time yields were this high.
Today, the lowest 5-year fixed rates are ranging from 4.04% to 4.29%, depending on the borrower’s situation. That is a little under the typical lender spread. In other words, lenders are sacrificing margins to keep rates low. But the question is… how long can lenders maintain the current rates before they are forced to increase? That’s a rhetorical question.
When Canada-U.S. trade negotiations broke down almost two weeks ago, bond yields dropped notably and relieved some of that upward pressure. But that move only lasted a few days as yields have now rebounded back to their peak, and the upward pressure on fixed rates has resumed.
For more information on how this works, check out my blog on Fixed Mortgage Rate Pricing Explained
Why the Bank is Balancing Growth and Inflation
The Bank of Canada is dealing with two competing pressures.
On one side, continuing Canada-U.S. trade uncertainty and tariffs are weighing on exports, business confidence, investment and economic growth. Companies may delay spending when they do not know what their costs or market access will look like next month.
That can slow the economy… and weaker growth can make a lower interest-rate setting more appropriate.
On the other side, tariffs can increase the cost of imported goods and disrupt supply chains. Energy prices can also push inflation higher. A weaker Canadian dollar may increase the cost of goods imported to Canada.
Middle East and broader geopolitical risks matter for mortgage rates mainly through these channels: energy prices, inflation expectations, global bond markets and investor confidence.
So the Bank is trying to avoid two mistakes:
1. Keeping rates too high for too long and putting unnecessary pressure on households, businesses and employment.
2. Easing too quickly while tariff-related costs and energy pressures cause inflation to move higher.
That is the balancing act the BoC needs to perform.
The Next Bank of Canada Announcement is October 28
The Bank of Canada’s next scheduled interest-rate announcement is October 28, 2026, according to its published 2026 announcement schedule.
That date is worth noting: but do not build your entire mortgage decision around it.
While economists are expecting the Bank of Canada to hold once again on this date, there is never a guarantee that they will. The Bank will be watching inflation, employment, growth, trade conditions, energy prices and financial conditions before making its next decision. As I always say… time will tell.
Frequently Asked Questions
Does today’s hold lower my mortgage payment?
No. A hold means the Bank did not change its overnight-rate target. Variable mortgage rates and HELOC pricing will generally remain unchanged if your lender’s prime rate remains unchanged.
Will my fixed mortgage rate change?
An existing fixed mortgage rate does not change because of today’s announcement. New fixed mortgage rates can still move based on bond yields, inflation expectations, global rates and lender funding costs.
Is prime rate the same as the Bank of Canada rate?
No. The overnight rate is the Bank of Canada’s policy rate. prime rate is set by commercial lenders and is currently approximately 4.45%. Variable mortgages are usually priced as prime plus or minus a lender-specific discount.
Should I wait until the next Bank of Canada announcement to make a mortgage decision?
Definitely not! If you are buying, refinancing or renewing your mortgage soon, you’ll want to get a rate locked in ASAP. There is currently upward pressure on fixed mortgage rates given that bond yields have reached their highest point since May 2024. At that time, fixed mortgage rates were a lot higher than where they are today, meaning fixed rates could increase at any time without additional warning.
Final Thoughts
The Bank of Canada held its overnight-rate target at 2.25% for the seventh consecutive time. That is good news for short-term stability, particularly if you have a variable mortgage or HELOC. But fixed mortgage rates are a different animal altogether.
If you have a fixed mortgage rate locked in, then you’re safe. But if you have a purchase closing or mortgage renewal within the next 120 days, I would suggest getting something locked in right away. Even if bond yields remain at current levels, the lowest fixed mortgage rates are in danger of increasing, which can happen at any time without warning. If the upward trend in bond yields continues, then increases to fixed mortgage rates will be imminent. The yields are up another 2.36% today at the time of writing, which is sounding the rate increase alarm.
If you lock in and rates settle back down, then we can always get your rate dropped for you… and we always do. We’ll continue monitoring rates for you right up until your new mortgage closes. We’re committed to ensuring you get the lowest rate available.
Reach out to us today and we’ll let you know the lowest rate you’ll be eligible for. Keep in mind that rate is only one component of your mortgage. We’ll also take the time to find out a bit more of your situation to ensure we’re not just giving you the lowest rate, but that we’re giving you the lowest rate on a mortgage that supports your needs and goals, positioning you for long-term savings… over and above the lowest rate.
Other important blogs worth reading:
How to Choose the Best Mortgage Renewal Strategy for 2026
Hunting for Cheap Mortgage Rates? 7 Mistakes You’re Probably Making Right Now
HELOC vs. Refinancing: Which is Better for Accessing Your Home’s Equity?
3 Year vs 5 Year – Which Mortgage Strategy Wins in 2026?
How to Choose Between a Fixed or Variable Rate in 2026
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