How Do Bank of Canada Rate Changes Affect Mortgage Rates?
A Bank of Canada rate change feeds into variable mortgage rates within a day or so. Fixed mortgage rates are a different story, because lenders price them off Government of Canada bond yields rather than the policy rate.
The variable path is short. The Bank sets a target for the overnight rate on eight fixed dates a year, and that target guides the prime rate commercial banks use for mortgages and lines of credit, as the Bank explains. On October 28, 2026, it raised the policy rate a quarter point to 2.50%, its first increase since July 2023. Prime at the big banks went from 4.45% to 4.70% the next day, as National Bank's announcement shows. Anyone with a variable-rate mortgage or a HELOC felt that change. On a $500,000 balance, a quarter point adds roughly $1,250 a year in interest.
Fixed rates follow a different signal. Lenders generally use Government of Canada bond yields as the benchmark and add a margin on top. Those yields respond to inflation, global markets and what investors expect the Bank to do next. A hike that markets saw coming may already be priced in, so fixed rates can climb before an announcement and sit still after one.
Timing decides when you feel any of this. If your rate is variable, it tracks prime for the whole term and reacts right away. A fixed rate stays put until your mortgage term ends, and then the market of that day sets your next one. The Financial Consumer Agency of Canada describes a fixed rate as unchanged for the entire term, while a variable rate may rise and fall. The Bank's next scheduled announcement is December 9, 2026.
Related reading: What Is a Mortgage Rate Hold and How Long Does It Last in Canada?, What Is a Mortgage Renewal and Your Options in Ontario? and Mortgage Stress Test in Canada: How It Works.
