Fixed Mortgage Rates Can Still Rise Even When Bank's Rate Remains Unchanged

The Bank of Canada's policy rate has a direct impact on prime rates and variable mortgage rates, but not as much influence over fixed mortgage rates. Fixed rates are more closely tied to Government of Canada bond yields and lender funding costs.

Despite the Bank of Canada keeping its policy rate at 2.25% since October 2025, the five-year Government of Canada bond yield has risen from 2.73% on that day to 3.42% on September 2, 2026. This increase in bond yields is a key factor in why fixed mortgage rates can still climb even when the Bank's rate remains unchanged.

Government of Canada bond yields are influenced by investor expectations for inflation and interest rates, as well as broader market conditions. When investors expect higher inflation or anticipate central banks raising rates later, they demand higher yields today, which lenders then pass into fixed mortgage rates along with their own funding costs.