Fixed Mortgage Rates Are Rising — Don’t Panic, Prepare

Fixed mortgage rates have been moving higher again.

That may seem confusing if you’ve been following the Bank of Canada. The Bank has not increased its policy rate, and prime remains unchanged. So why are fixed mortgage rates going up?

The answer is that fixed and variable mortgage rates don’t move for the same reasons.

Variable mortgage rates are closely tied to lenders’ prime rates, which are heavily influenced by the Bank of Canada’s policy rate. Fixed mortgage rates are influenced much more by the bond market — and Government of Canada bond yields have risen significantly.

In September, several of Canada’s major banks increased fixed mortgage rates, generally by 10 to 20 basis points on selected terms. Other lenders have made increases as well. Mortgage Rates Canada

Does this mean rates will continue going up?

Nobody knows.

And that’s really the point of this article.

I Learned This Lesson the Hard Way

Back in 2020 and 2021, Canadians were repeatedly told that interest rates would remain low for some time.

I listened.

Normally, I try to look at all the information available and form my own opinion. But like many people, I took some comfort from what we were being told about the outlook for inflation and interest rates.

Then things changed.

Inflation increased dramatically and the Bank of Canada responded by raising interest rates at a pace that many borrowers had not prepared for.

What did I learn?

Predictions are not guarantees.

That doesn’t mean we shouldn’t listen to the Bank of Canada, economists or other experts. We absolutely should.

But economic conditions can change. Wars happen. Energy prices move. Governments change policies. Inflation can surprise us. Bond markets react. Events thousands of kilometers away can eventually affect the mortgage rate you’re offered here in Hamilton.

So rather than trying to perfectly predict what happens next, I think borrowers should prepare for more than one possibility.

Why Are Fixed Mortgage Rates Rising If the Bank of Canada Hasn’t Raised Rates?

This is an important distinction.

As of September 2026, the Bank of Canada’s policy rate remains at 2.25%, where it has been throughout the year. Prime at the major banks remains 4.45%. Bank of Canada

But fixed mortgage rates don’t simply follow prime.

Government of Canada bond yields — particularly yields with similar terms to the mortgage being priced — are an important influence on lenders’ funding costs and fixed mortgage pricing.

The five-year Government of Canada bond yield rose sharply in September, reaching a 52-week high of 3.711% on September 14. Several major banks subsequently increased selected fixed mortgage rates, particularly in the two- through five-year range. Mortgage Rates Canada

That’s why you can see fixed mortgage rates rising while prime doesn’t move at all.

It’s also a good illustration of why simply waiting for the next Bank of Canada announcement doesn’t tell you everything you need to know about where fixed mortgage rates are going.

What Happens Next?

There are legitimate reasons to be concerned about inflation again.

The Bank of Canada has specifically pointed to higher energy prices, the ongoing conflict in the Middle East and tariffs as risks to the inflation outlook. At the same time, Canada’s economy has its own weaknesses that could work in the opposite direction. Bank of Canada

Those competing forces make forecasting particularly difficult.

Fixed mortgage rates could continue higher.

Bond yields could fall and fixed rates could come back down.

The Bank of Canada could eventually change its policy rate, affecting prime and variable-rate mortgages.

I don’t pretend to know exactly which of those things will happen.

But we can prepare for them.

If You’re Buying a Home, Get Pre-Approved Early

If you’re thinking about purchasing a home, don’t wait until you’ve found the perfect property before dealing with the financing.

Get pre-approved early.

A pre-approval helps establish how much you can realistically afford and, depending on the lender and circumstances, may allow you to hold a rate for a period of time.

That can be particularly valuable in a rising-rate environment.

If rates rise while you’re shopping, an existing rate hold may protect you, subject to the lender’s terms. If rates fall before closing, we can investigate whether a better rate is available.

The idea isn’t to panic because rates have increased.

It’s to give yourself options.

If Your Mortgage Is Renewing, Start Early

The same principle applies if your mortgage is approaching renewal.

Don’t wait until the renewal notice arrives and assume that signing it is your only choice.

Starting early gives us time to look at your existing mortgage, compare alternatives and determine whether staying with your current lender makes sense.

It also gives us time to look at what’s changed in your life.

Maybe your income is different. Maybe you’ve accumulated other debt. Perhaps you’re planning to move, renovate or help one of your children buy a home.

Your mortgage should be considered in the context of your overall financial situation — not simply renewed automatically because the maturity date arrived.

Fixed or Variable?

Variable mortgage rates can sometimes be significantly lower than comparable fixed rates.

That can make them very attractive.

But we’ve also seen what can happen when prime moves rapidly.

For some borrowers, that uncertainty is perfectly acceptable. They have room in their budget, understand the risk and are comfortable with fluctuations in rates or payments.

For others, it creates enormous stress.

There is nothing wrong with recognizing that.

If you’re going to worry every time the Bank of Canada makes an announcement, or if a meaningful increase in your mortgage payment would put pressure on your household budget, the potential savings from a variable rate need to be weighed against that risk.

Likewise, choosing a fixed rate means accepting that rates could fall after you’ve locked in.

There isn’t one answer that’s right for everybody.

The important thing is to understand what you’re gaining, what risk you’re accepting and whether you can live with the outcome if your prediction turns out to be wrong.

Don’t Panic. Prepare.

We can’t control wars, energy prices, inflation, tariffs, bond markets or the Bank of Canada.

And none of us knows with certainty where mortgage rates will be six months, one year or three years from now.

But we can prepare.

If you’re buying, get pre-approved early.

If you’re renewing, start looking at your options before the last minute.

If you’re choosing between fixed and variable, don’t make the decision solely on which rate is cheaper today. Think about what happens if rates move in either direction.

Most importantly, don’t build your financial plan around the assumption that anybody can predict the future perfectly.

Prepare for uncertainty, understand your options, and make a mortgage decision that you can be comfortable with even if the future doesn’t unfold exactly as expected.

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Robert Floris, CFP, AMP
Mortgage Agent Level 2 | M08004919
Mortgage Architects