Why Are Mortgage Rates Going Up in Canada? What Buyers and Homeowners Need to Know

If you have been watching mortgage rates lately, you may have noticed some changes. Fixed mortgage rates have been climbing, and variable rates are also facing pressure to rise since the last meeting on October 28th was the first time they have raised the policy rate in over 3 years. This can make things a little more stressful if you are planning to buy a home, renew your mortgage, or refinance.

But why are rates going up? And what does this mean for you? Let's break it down.

Why Are Fixed Mortgage Rates Going Up?

Fixed mortgage rates are closely tied to Government of Canada bond yields. When bond yields rise, lenders often increase their fixed mortgage rates too.

There are a few reasons bond yields have been moving higher. Rising oil and gas prices, concerns about inflation, changes in the global economy, and increased government borrowing can all play a role. When investors worry that inflation may stay higher for longer, bond yields can rise. This puts pressure on fixed mortgage rates.

One thing many people do not realize is that fixed mortgage rates are not directly controlled by the Bank of Canada. This means lenders can increase fixed rates even when the Bank of Canada has not changed its overnight rate. That is why we sometimes see fixed rates move before a Bank of Canada announcement.

Why Are Variable Mortgage Rates Going Up?

Variable mortgage rates work a little differently. They are tied to a lender's prime rate, which is influenced by the Bank of Canada's overnight interest rate.

When the Bank of Canada increases its rate, variable mortgage rates usually increase too. When it lowers rates, variable rates generally come down unless you are with a lender where the variable payment is static, meaning the payment does not change (just the % of payment that goes towards interest vs principal). 

On October 28, 2026, the Bank of Canada increased its policy rate by 0.25%, bringing it to 2.50%. With inflation still a concern, there is uncertainty about what may happen next. While further increases are possible, no one knows for certain where rates are headed.

This is why it is important to understand how a variable mortgage could affect your monthly budget before choosing one.

Fixed vs. Variable: Which Mortgage Is Better?

This is one of the most common questions I get, and the truth is that there is no one answer for everyone.

A fixed mortgage gives you the comfort of knowing your interest rate and regular payment will stay the same throughout your mortgage term. This makes budgeting easier because you know what to expect each month. However, if you need to break your mortgage early, the penalty can sometimes be quite large.

A variable mortgage may offer a lower starting rate, but your rate can change as the Bank of Canada makes decisions. Depending on the type of variable mortgage you choose, your payment may change, or the amount going toward interest and principal may change. If rates come down, you could benefit. If rates increase, your mortgage costs could go up.

The best option depends on your finances, your comfort with changes, and your plans over the next few years. The lowest rate today is not always the best mortgage for your situation.

What Does This Mean If You Are Buying a Home?

If you are planning to buy a home, now is a great time to review your numbers before you start shopping.

Even a small change in mortgage rates can affect your monthly payment and the amount you may qualify for. It is important to understand what you can comfortably afford, how much you need for closing costs, and what your payments will look like before making an offer.

I always recommend starting with a monthly payment that feels comfortable for your family. Just because a lender approves you for a certain amount does not mean you need to spend that much.

If you already have a pre-approval, it is also worth reviewing your numbers to make sure they are still up to date.

What Should Realtors Be Watching?

With mortgage rates changing, buyers may need updated numbers before viewing homes or submitting offers.

A buyer who qualified a few weeks ago may have a different monthly payment or buying budget today. Even a small rate increase can make a difference, especially when buyers are working with a tight budget.

This is where having a mortgage professional involved early can help. I am always happy to review a buyer's budget, update their pre-approval, explain their options, and help make sure they are shopping within a realistic price range.

Why the Lowest Mortgage Rate Isn't Always the Best

When rates start moving, it is easy to focus only on getting the lowest rate possible. But your mortgage is about much more than the interest rate.

You also need to look at mortgage penalties, prepayment options, payment flexibility, and what happens if your plans change. For example, saving a few dollars each month may not be worth it if you end up with a large penalty when you need to sell or refinance.

My goal is to help you find a mortgage that fits your life, your budget, and your future plans. Sometimes the best mortgage is not the one with the lowest rate, but the one that gives you the right balance of savings and flexibility.

Have Questions About Mortgage Rates?

Whether you are buying your first home, moving, renewing, or thinking about refinancing, I am happy to help you understand your options.

Mortgage rates will always change with the economy, but having the right plan can make a big difference. Let's make sure you know your numbers and have a mortgage that works for you.

Ashley Najim | Mortgages by Ashley Najim – Powered by BRX

📞 519-339-0883
📩 [email protected]
🌐 www.chatwithashley.ca

Helping families in Sarnia, Lambton County, and across Southwest Ontario make confident mortgage decisions.