The Bank of Canada Held Rates in September 2026. Why Fixed Mortgage Rates Could Still Rise

As of September 2026, the Bank of Canada left its policy rate at 2.25%, the seventh hold in a row. That protects variable mortgage holders for now. Fixed rates are a different story: they follow the bond market, and rising bond yields can push fixed mortgage rates up even while the policy rate sits still.

I am Moe Asgarian, a real estate broker in Toronto, and most of the mortgage questions I get from clients start with the policy rate. That is the wrong place to stop. Here is what the September 2026 decision said, and what it did not say.

A Seventh Straight Hold, at the Bottom of Neutral

At its September 2026 meeting the Bank of Canada kept the policy rate at 2.25%. That is seven consecutive meetings with no change, and the rate now sits at the bottom of what the Bank calls its neutral range, the level where policy is neither pushing the economy nor holding it back. Nothing in the data had moved enough to justify a cut or a hike. The expectation coming out of that meeting was that the rate stays where it is until the end of 2026, with 2027 a far more open question.

Why Inflation Is Back in the Conversation

The number that changed the mood was inflation. Canadian inflation reached 3% in July 2026 against the Bank's 2% target, and Governor Tiff Macklem said plainly that inflation is still high. Energy is a big part of it. With the war in the Middle East intensifying and tanker traffic through the Strait of Hormuz disrupted, oil prices climbed again, and the American benchmark oil index rose about 13% between the July and September 2026 meetings. The Bank's worry is not the gas pump by itself. It is that expensive energy, if it lasts, works its way into the price of everything else.

Tariffs Add Another Push on Prices

The trade file added to the pressure. As of September 2026, the United States has applied a 50% tariff to roughly $28 billion of Canadian goods, and Canada is preparing retaliatory tariffs on about $27.6 billion of American goods. Macklem's own assessment at the September 2026 meeting was that the direct effect of these tariffs on inflation is probably fairly limited, and that energy prices are the bigger risk. Reporters kept circling the same question: is the Bank now more afraid of rising prices than of a weak economy?

Bond Yields Are Doing Part of the Bank's Job

Here is the part that matters most for mortgages. Global bond yields have risen sharply, and the Bank pointed to heavy government debt, large investment in artificial intelligence infrastructure, Middle East tensions and high oil prices as the drivers. Fixed mortgage rates in Canada are priced off the bond market, and the five year Government of Canada yield is the one to watch. The Bank said higher yields have already tightened financial conditions, which is another way of saying that the bond market is doing part of the work a rate hike would normally do.

Fixed or Variable: What I Tell Clients Right Now

So the September 2026 hold is good news if you are on a variable rate. While the policy rate sits still, no new pressure arrives from that direction. A fixed rate is a different question. If inflation worries deepen and long term yields keep climbing, fixed mortgage rates can rise without the Bank touching anything. When clients ask me which way to go, I tell them to watch two things rather than one: the path of inflation and the direction of bond yields. If Middle East tensions, expensive energy and the tariff fight all persist while the Canadian economy holds up, a rate increase becomes a serious possibility. If the economy weakens instead, the whole equation flips. As of September 2026, inflation, the job market and growth had each avoided a real shock.

If your renewal is coming up, or you are deciding between fixed and variable on a purchase, fill out the form at the bottom of this page or book a free consultation and we will go through your numbers together. Stay well and take care.