The Fed Raised Rates in September 2026: Will Canadian Mortgages Get More Expensive?

As of early October 2026, the US Federal Reserve's September 16, 2026 quarter point hike does not automatically raise Canadian mortgage rates. The Bank of Canada sets its own policy rate, held at 2.25% as of early October 2026. The American move can reach Canadian fixed rates through bond yields, but the size and timing are not set in advance.

I'm Moe Asgarian, a real estate broker in Toronto, and this is what I walk clients through when a US rate headline lands in the middle of their home search.

What the Federal Reserve decided on September 16, 2026

At its September 16, 2026 meeting the Federal Reserve raised the US benchmark rate by 0.25%, which put the new American range at 3.75% to 4%. All 12 voting members backed that decision. The reasoning given on September 16, 2026 was that US inflation was still high and that a higher rate could help bring it back toward the 2% target. The Fed also published fresh projections at that meeting, and those projections showed that members' view of the rate path had shifted since June 2026. A projection is not a committed decision for a future meeting.

Why an American decision can still reach a Canadian mortgage

Canadian and American financial markets sit close together. When investors change their expectations about US rates, Canadian bond yields can move too, and bond yields are one of the inputs lenders use when they price a fixed mortgage. So a headline out of Washington can end up inside the fixed rate a Canadian bank offers you. What nobody can tell you ahead of time is how much and how fast. Part of the news is usually priced into the market before the official announcement, which is why it would be wrong to say every Canadian bank had to lift its fixed rates after the September 16, 2026 meeting. As of early October 2026 it still was not possible to say with any confidence whether the Bank of Canada would raise, cut or hold, although at that point the odds of an increase looked to be growing by the day.

Fixed and variable react differently

A variable mortgage is tied much more closely to the banks' prime rate and to the Bank of Canada's own decisions. An American hike on its own does not change your variable payment. Even when a rate does move, what happens next depends on your contract: in some agreements the payment amount changes, and in others the payment stays put while the split between interest and principal shifts. If you hold a variable mortgage, read your own agreement closely instead of guessing. As of early October 2026 the Bank of Canada's policy rate was 2.25%, below the American range of 3.75% to 4% set on September 16, 2026, and that gap on its own does not decide the Canadian dollar or the price of a mortgage.

What a higher cost of borrowing means in the Toronto market

A higher cost of borrowing tightens budgets. A buyer who can carry one specific monthly payment and no more may have to step down to a cheaper property, and that can soften demand in parts of the market. Builders feel it too. A project that stops being profitable at a higher financing cost gets delayed or cancelled, and that becomes a supply problem later. For scale, as of early October 2026 the Canada Mortgage and Housing Corporation had estimated that returning housing affordability to its 2019 level would take roughly 430,000 to 480,000 new units a year across the country. That estimate is a long run national need, not a claim that every city and every property type is short by the same amount. In practice the condo market in one neighbourhood can be full of active listings while freehold homes in another neighbourhood have far fewer.

Get pre-approved and lock your rate before you shop

Here is the advice I give every buyer. Before you look at a single house, start with the pre-approval and lock the rate you are being quoted. Lock periods differ by lender, and as of early October 2026 you could generally hold a mortgage rate for at least three to four months. That lock is protection: if fixed or variable rates move while you are shopping, you are not exposed to the change. Then build your budget on the rate your lender is actually offering, not on a number from a news story. For a specific property, look at sold prices and comparable homes in that same area, and read the conditions of that local market before you set your offer. If you are selling, remember that a US rate decision on its own cannot price your home. Competing listings and recent sales in your own neighbourhood are the better guide.

If you want a closer look at your own purchase or sale, fill out the form at the bottom of this page or book a free consultation. Stay well and take care.