Explainer
How mortgage rates are set in Canada
Fixed and variable rates are driven by two different things — which is why they do not move together. The mechanism, the Bank of Canada's policy rate, and when the next decision lands.
Last verified: August 2, 2026
- Policy rate today
- 2.25% — unchanged since October 29, 2025
- Next scheduled announcement
- October 28, 2026 — with the Monetary Policy Report
Source: Bank of Canada. Verified August 2, 2026.
Variable rates follow the Bank of Canada. Fixed rates do not.
This is the single most useful thing to understand about mortgage pricing, and it explains behaviour that otherwise looks random.
Variable — the policy rate, then prime, then your discount
The Bank of Canada sets a target for the overnight rate, usually called the policy rate. Lenders set their prime rate off it, and a variable mortgage is priced as prime minus a discount — for example prime minus 0.55%.
The discount is negotiated when you sign and stays fixed for your term. Prime moves; your discount does not. So when the Bank moves the policy rate, a variable borrower feels it almost immediately — either as a changed payment, or as a changed split between interest and principal, depending on which kind of variable product you hold. That is a question worth asking your lender explicitly rather than assuming.
Fixed — the bond market, which moves every day
Fixed mortgage rates are priced off Government of Canada bond yields — principally the five-year bond for a five-year term — plus a lender spread of roughly one to two percentage points to cover risk and costs.
Bond yields trade continuously and are set by investors anticipating where rates are going, not by the Bank announcing where they are. Two consequences follow, and both surprise people:
- Fixed rates often move before an announcement, sometimes weeks before, because the market has already priced in what it expects the Bank to do.
- Fixed rates can move when the Bank does nothing, and occasionally in the opposite direction to a Bank decision — if the decision or its language differed from what the market expected.
So "the Bank held rates, why did my quoted fixed rate change?" has an ordinary answer: your fixed rate was never following the Bank in the first place.
The Bank of Canada's policy rate — the last two years
Changes only. The Bank announces on eight fixed dates a year, and most announcements leave the rate where it is; a hold shows here as the gap between two rows. There have been 6 holds since the last change.
| Date | Policy rate | Change |
|---|---|---|
| October 29, 2025 | 2.25% | −0.25 |
| September 17, 2025 | 2.5% | −0.25 |
| March 12, 2025 | 2.75% | −0.25 |
| January 29, 2025 | 3% | −0.25 |
| December 11, 2024 | 3.25% | −0.5 |
| October 23, 2024 | 3.75% | −0.5 |
| September 4, 2024 | 4.25% | −0.25 |
Two years of changes. Source: Bank of Canada, verified August 2, 2026. For the full historical series, go to the Bank directly.
Announcement dates
Eight fixed dates a year, published in advance. Four carry the Monetary Policy Report — the Bank's quarterly forecast — and those are the ones most likely to move the bond market, which means they are the ones most likely to move fixed rates.
Useful if you are deciding between fixed and variable, sitting on a rate hold, or coming up to renewal: you can see what is scheduled before your decision has to be made.
| Announcement | Monetary Policy Report |
|---|---|
| October 28, 2026 | Yes |
| December 9, 2026 | — |
| January 27, 2027 | Yes |
| March 3, 2027 | — |
| April 28, 2027 | Yes |
| June 2, 2027 | — |
| July 21, 2027 | Yes |
| September 8, 2027 | — |
| October 27, 2027 | Yes |
| December 8, 2027 | — |
Scheduled dates published by the Bank of Canada. Announcements are made at 9:45 ET.
What to do with this
Knowing the mechanism is worth something specific: it tells you which news actually applies to you.
- On a variable rate? The announcement dates above are your dates. A policy change reaches you within about a month.
- Shopping a fixed rate? Watch bond yields rather than the Bank, and remember a rate hold from a lender protects you against increases while you shop.
- Coming up to renewal? The rate on the day matters far less than whether you shop it at all — which is the subject of the guide below.
What this page deliberately does not do is tell you which to choose. Fixed or variable, renewing, and what it costs to break a mortgage covers the decisions — including the prepayment penalty, which is where the expensive surprises live.
To turn any rate into a payment, use the mortgage payment calculator; to work out what you can borrow, the affordability calculator applies the stress test for you.