The Bank held at 2.25%. Why fixed quotes still moved

The Bank of Canada held its policy rate at 2.25% on 2 September, so variable payments do not change. Fixed quotes follow bond yields, and those have risen.

The Bank of Canada held its target for the overnight rate at 2.25% this morning, with the Bank Rate at 2.5% and the deposit rate at 2.20%. That is where the policy rate has sat since July.

The number that moved this summer was a different one, and it is the one that decides what a fixed mortgage costs.

Does anything change on your variable rate today?

No. A variable rate mortgage and a home equity line of credit follow your lender's prime rate, and prime moves when the Bank moves its policy rate. The Bank did not move it, so your payment is the same this week as it was last week.

The next scheduled announcement is 28 October 2026, and the Bank's next Monetary Policy Report is published the same day.

Then why has your fixed quote gone up?

Because fixed rates are priced off the bond market rather than off the policy rate. The Bank said so plainly in today's release: "Financial conditions have tightened since July. Long-term bond yields have moved up globally, including in Canada."

Lenders fund a five year fixed mortgage close to a five year Government of Canada bond, so they watch that yield and add a spread on top. From the Bank's own selected bond yields, the five year benchmark closed at 3.14% on 15 July, the day of the last decision, and at 3.35% on 1 September.

Twenty one basis points sounds like nothing. Put it on a $700,000 mortgage amortised over 25 years and a quoted rate of 4.00% carries a payment of about $3,682 a month, while 4.21% carries about $3,762. That is roughly $80 more a month, or about $960 over a year, across a stretch where the policy rate never moved.

What does inflation near 3% mean for a buyer?

The Bank said CPI inflation "has been hovering around 3% in recent months, mainly because of persistently higher gasoline prices", and that excluding gasoline inflation was 2.2% with core measures close to 2% in July. It also said the upside risks to its inflation forecast have increased, pointing at oil prices and at new US tariffs and Canadian countermeasures raising costs for some businesses.

For a household the practical read is narrow. Nothing in this release changes what a lender will approve today. What changes that is the rate you are actually quoted, because the qualifying rate is built on top of it. How the stress test works has the arithmetic.

Is there anything in it for sellers?

One line, and it is national rather than local. The Bank said Canadian GDP rose 3.3% in the second quarter and that "following several weak quarters, there was some rebound in housing activity", with the unemployment rate edging down to 6.4% in July. That is the Bank describing the country, not the GTA, and it is describing the spring and early summer rather than this week.

What is worth doing before 28 October?

Ask your lender to hold a rate if you renew this year. A hold costs nothing and it is the part of this you control.

Run your numbers at the rate you would actually be offered rather than the one in the advertisement. Our affordability calculator does that in about a minute.

If you are weighing fixed against variable, the useful thing is knowing which rate follows which. We set that out in why fixed quotes rise while the Bank sits still.