If you have been watching mortgage rates lately, you may have noticed something confusing.
For a while, it looked like borrowing costs were finally getting better.
Then, heading into the fall of 2026, some fixed mortgage rates started going up again.
At the same time, the Bank of Canada has not raised its main interest rate. It has stayed at 2.25% since October 2025 and was held there again on September 2, 2026. (Bank of Canada)
So how can mortgage rates go up when the Bank of Canada rate has not changed?
The answer is that fixed and variable mortgage rates work differently.
There Are Two Different Rates to Watch
Variable mortgage rates are closely tied to the Bank of Canada.
When the Bank of Canada raises or lowers its rate, variable mortgage rates usually move too.
Fixed mortgage rates are different.
They are affected much more by something called Government of Canada bond yields.
You do not need to understand the bond market to understand the basic idea:
When bond yields go up, fixed mortgage rates often go up too.
And that is exactly what we saw happen heading into the final months of 2026.
What Happened to Mortgage Rates This Summer?
Through much of the summer, fixed mortgage rates were fairly steady.
Then things started to change in September.
The 5-year Government of Canada bond yield rose quickly.
By September 28, it had reached about 3.73%, its highest level in roughly a year. (Mortgage News Canada)
That put pressure on mortgage lenders.
By the end of September, TD and CIBC had joined RBC, BMO, Scotiabank and National Bank in raising some of their fixed mortgage rates.
Many of those increases were around 0.15% to 0.30%, although the exact change depended on the lender and mortgage. (Mortgage News Canada)
So even though the Bank of Canada had done nothing, fixed mortgage rates were moving.
Why Did Bond Yields Go Up?
A bond is basically a loan to the government.
Investors lend money to the Government of Canada, and the government pays them interest.
The return investors receive is called the yield.
When investors decide they need a better return for lending their money, bond yields rise.
There are several reasons that can happen.
Inflation Is Still a Concern
Inflation simply means prices are going up.
If investors think food, fuel, materials and other costs will keep rising, they want to earn more on their money.
That can push bond yields higher.
Right now, high energy prices and trade tariffs are adding uncertainty. The Bank of Canada has said both could put more pressure on prices. (Bank of Canada)
Investors Think Interest Rates Could Stay Higher
Bond markets are always trying to guess what will happen next.
Investors are not only looking at today’s Bank of Canada rate.
They are asking:
Where will interest rates be next year?
If they think rates could stay higher, or possibly rise later, they will want a better return on bonds today.
That pushes bond yields up.
A Stronger Economy Can Also Push Rates Higher
This one sounds strange.
A stronger economy is normally good news.
But when people have jobs and are spending money, prices can rise faster.
That can make inflation harder to control.
If investors believe that could happen, they may expect interest rates to stay higher.
Again, bond yields can rise.
Government Borrowing Matters
Governments borrow money by selling bonds.
When governments need to borrow more money, more bonds are put up for sale.
Investors may then ask for a better return before buying them.
That can also push bond yields higher.
What Happens in the United States Matters Too
Canada does not operate on its own.
Our bond market is connected to what happens around the world, especially in the United States.
When U.S. bond yields rise, Canadian bond yields often feel pressure too.
That can eventually show up in Canadian fixed mortgage rates.
So What Could Happen Through the Rest of 2026?
This is the big question.
The important thing to know is that no one knows exactly where mortgage rates will go next.
There are too many moving parts.
But as we enter the final quarter of 2026, there are a few things worth watching.
The Bank of Canada has kept its rate at 2.25%, and some major economic forecasts still expect it to stay there through the end of the year.
TD Economics, for example, currently expects the Bank of Canada rate to remain at 2.25% through the end of 2026. (TD Economics)
RBC also does not currently expect an October rate increase, although it sees the possibility of increases in 2027 if inflation remains a problem. (RBC)
That means variable mortgage rates may stay fairly steady in the short term.
Fixed mortgage rates are harder to predict.
TD expects the 5-year Government of Canada bond yield to remain fairly high through the end of this year before slowly coming down during 2027. Its September forecast has the yield around 3.50% at the end of 2026, compared with about 3.60% in the third quarter. (TD Economics)
If that happens, fixed mortgage rates could eventually get some relief.
But it probably would not mean a sudden return to the very low mortgage rates Canadians became used to several years ago.
And if inflation stays high, oil prices rise further or bond yields increase again, fixed mortgage rates could move higher instead.
What Does This Mean for Home Buyers?
Mortgage rates matter because they change how much a buyer can afford.
A buyer may feel comfortable spending a certain amount each month.
If mortgage rates rise, more of that monthly payment goes toward interest.
That means the buyer may qualify for a smaller mortgage.
Even a small rate increase can make a difference.
For buyers who are actively looking for a home, it is worth speaking with a mortgage professional about a rate hold.
That can sometimes protect a mortgage rate for a set amount of time while you shop for a home.
What Does This Mean for Sellers?
Mortgage rates affect sellers too.
If buyers can borrow less money, they may become more careful about what they are willing to pay.
Some buyers may move into a lower price range.
Others may wait.
That can mean fewer buyers for some homes and more pressure on sellers to price correctly.
It does not mean homes will not sell.
It means buyers are likely to pay very close attention to value, price and monthly cost.
That is especially important in a market where buyers have several homes to choose from.
The Biggest Thing to Remember
You do not need to become an expert in bonds.
Just remember this:
Variable mortgage rates mostly follow the Bank of Canada.
Fixed mortgage rates are heavily influenced by bond yields.
So the Bank of Canada can leave its rate unchanged while fixed mortgage rates still rise.
That is what we saw happen heading into the final quarter of 2026.
For the rest of the year, the biggest things to watch will be inflation, oil prices, the economy and bond yields.
If inflation settles down and bond yields begin to fall, we could see some relief in fixed mortgage rates.
If inflation stays high and bond yields continue to rise, fixed mortgage rates could remain higher for longer.
For buyers and sellers in Smiths Falls, Perth, Rideau Lakes and the surrounding area, the important thing is not trying to perfectly time the interest rate market.
It is understanding what today’s rates mean for your own buying power, home value and plans.
Holly Kinch, REALTOR®
RE/MAX Affiliates Marquis
hollykinch.com