BANKS CONTINUE TO RAISE FIXED RATES AS THE BANK OF CANADA DECISION NEARS
Banks have been raising fixed mortgage rates since March, and the increases are continuing. Lenders including CIBC and TD have raised select three and five-year fixed rates as the Government of Canada five-year bond yield, the benchmark lenders use to price five-year fixed mortgages, has climbed from about 2.6 per cent before the conflict in the Middle East to more than 3.7 per cent.
Variable pricing sits well below fixed. In some cases, variable rates are currently priced at least three-quarters of a percentage point below comparable fixed rates, though the gap varies by lender and product.
Expectations for the Bank of Canada are divided. Overnight swap markets are pricing in roughly a full percentage point of hikes over the next 12 months, which Dave Larock of Integrated Mortgage Planners has called aggressive. Manulife Investment Management expects quarter-point increases at both the October 28 and December 9 meetings, while TD Economics argues the case for hiking is not compelling. RBC Economics expects the Bank to hold through the end of the year and begin raising rates in early 2027. The policy rate has been 2.25 per cent since October 2025, with prime at 4.45 per cent.
Two data points come first. Statistics Canada releases the September inflation report on October 19, and the Bank of Canada announces its next decision on October 28. A Bloomberg survey of economists has inflation averaging 3.0 per cent over the next six months, with a return to the 2 per cent target not expected until the third quarter of 2027.
What this means for your mortgage: variable rates follow prime, so they move when the Bank moves, and depending on the product, either the payment or the share of it going to interest changes. Fixed rates follow the bond market, which has already been moving. For a renewal in the coming months, the question is less which way rates go than how much payment movement a household can absorb. A variable rate offers a lower starting point with the risk of higher costs if prime rises. A fixed rate offers certainty at a higher starting point. That trade-off depends on your budget and timeline.
TORONTO CONDOS REACH THEIR BEST AFFORDABILITY SINCE 2017, BUT ARE SELLING MORE SLOWLY
RBC Economics’ latest housing affordability report shows Toronto improved by 1.2 percentage points in the second quarter to 64.1 per cent, the largest gain among major cities. The measure is the share of median pre-tax household income needed to cover mortgage payments, property taxes and utilities. The condo segment drove the improvement and reached its most affordable level since 2017. Toronto remains the second least affordable major market in the country, behind Vancouver at 83.9 per cent.
Separate data from Wahi shows GTA condos averaged 36 days to sell in the second quarter of 2026, up from 32 days a year earlier and under 14 days in early 2022. Detached homes sell in roughly nine days. Wahi economist Ryan McLaughlin attributes the slowdown to investors leaving the market, lower federal immigration targets and the ongoing trade war, with inventory near historic highs.
RBC’s authors caution that the improvement may not last. Upward pressure on long-term interest rates, and the likelihood of Bank of Canada hikes next year, could put ownership costs on the rise again after dropping significantly since 2024. Rising bond yields affect fixed rates, and rate hikes affect variable rates.
What this means for your mortgage: a lower purchase price reduces the amount borrowed, but the monthly payment also depends on the rate. At the same price, a higher rate means a higher payment. Longer selling times can also stretch the gap between a pre-approval and an accepted offer, so it helps to know how long your rate hold lasts and what happens if rates move before closing.
TD CUTS ITS FORECAST, EXPECTING ONTARIO HOME SALES TO FALL 3 PER CENT THIS YEAR
TD Economics has lowered its Canadian housing outlook, now expecting national resales to fall 5.3 per cent in 2026, a deeper drop than the 1.8 per cent decline it forecast previously. It points to the Government of Canada five-year bond yield, which was up about 90 basis points from a year earlier by mid-September and has kept fixed mortgage rates elevated.
For Ontario, TD expects home sales to fall 3.0 per cent in 2026, then rebound 7.4 per cent in 2027, the strongest projected recovery in the country. Ontario prices are forecast to decline 2.6 per cent in 2026 and rise 0.6 per cent in 2027. TD deputy chief economist Derek Burleton said five-year yields are likely to stay elevated longer than previously expected, with room to pull back probably not until next year.
TD’s forecast assumes the Bank of Canada holds its policy rate at 2.25 per cent through 2027. That differs from the economists in the first story who expect hikes, a reminder that forecasts depend on their assumptions.
What this means for your mortgage: sales and price forecasts rest on where bond yields and the policy rate go, and nobody knows that in advance. A forecast is a reasonable input, but a purchase or renewal decision is better built on your own budget, your qualifying numbers and the payment you are comfortable carrying.
WHERE THINGS STAND
If you’re on a variable rate, the October 19 inflation report comes right before the Bank of Canada’s October 28 announcement. If you’re renewing, expect fixed pricing to look different than it did a month ago. If you’re buying, lower condo prices only help if the monthly payment holds.
Call or text 249-480-1249. HumberBayMortgages.ca.
Simon Browning | Mortgage Agent Level 2 | BRX Mortgage 13463
Sources: Canadian Mortgage Trends (Jared Lindzon, October 1, 2026); CMT News / Bloomberg (September 25, 2026); Canadian Mortgage Professional (September 24, 25, 29 and 30, 2026); RBC Economics; Wahi; TD Economics; Statistics Canada