The Bank of Canada held its overnight rate at 2.25% on September 2. Prime stayed at 4.45%. It was the Bank’s seventh consecutive rate hold.
Seven holds. Nothing to see here.
Except, of course, mortgage rates can still move.
This is one of those wonderfully Canadian financial arrangements in which the rate-setting bank does nothing, bond markets do something and homeowners are left wondering why the mortgage they looked at last month costs more today.
Jason Friesen, Partner and Mortgage Agent with Outline Financial, recently shared the firm’s September Mortgage & Economic Outline. It helps explain how the Bank of Canada can hold its rate steady while mortgage rates—and the monthly cost of carrying one—continue doing something else entirely.
Two kinds of mortgage rates. Two different rule books.
Variable mortgage rates generally follow the Bank of Canada’s policy rate. When the Bank changes its overnight rate, lenders typically change their prime rates.
Fixed mortgage rates are different. They are influenced primarily by Government of Canada bond yields, which can move every day in response to inflation, economic reports, oil prices, trade disputes and international events.
So while everyone is waiting for the Bank of Canada to make an announcement, the bond market may already have left the building.
According to Outline Financial, the five-year Government of Canada bond yield increased from 2.67% on February 27 to 3.63% on September 10. That is a rise of 96 basis points.
Fixed mortgage rates do not necessarily move by the same amount, but bond yields are an important signal of where they may be heading.
The practical point is simple: waiting for the next Bank of Canada announcement does not guarantee that today’s fixed mortgage rate will still be available tomorrow.
The economy is sending mixed messages
If you are hoping the economic data will provide a clear answer about what happens next, you may want to sit down.
Canada’s economy grew at an annualized rate of 3.3% during the second quarter of 2026. That was stronger than the Bank of Canada had forecast and eliminated earlier talk of a technical recession.
Good news.
Canada then lost approximately 41,700 jobs in August, with most of those losses in full-time employment.
Less good news.
The national unemployment rate remained at 6.4%, largely because the labour force also became smaller. Ontario’s unemployment rate edged up from 6.8% to 6.9%.
Inflation reached 3.0% in July, but much of that increase came from gasoline prices. Remove gasoline and inflation was 2.2%.
To summarize: economic growth was stronger, employment weakened, unemployment barely moved and inflation was high—unless you removed the particularly expensive thing everyone noticed becoming more expensive.
This is why the Bank of Canada keeps using words such as “uncertainty.” It is the central-banking equivalent of saying, “We’ll have to see.”
What are borrowers doing?
An increasing number of borrowers have been choosing variable-rate mortgages.
Bank of Canada data cited by Outline Financial show that variable mortgages accounted for 35.8% of mortgage originations in June, up from 28.5% in March.
This does not mean that 35.8% of borrowers know something the rest of us do not.
A variable mortgage may allow a borrower to benefit if rates eventually fall. It also exposes that borrower to higher payments or increased interest costs if rates rise.
A fixed mortgage provides greater predictability, but the borrower may be locking in after bond yields have already moved higher.
The best mortgage is not necessarily the one attached to the most confident interest-rate prediction. It is the one that still works if the prediction is wrong.
Income stability, future plans, tolerance for changing payments and the possibility of moving or refinancing all matter.
What does this mean for Toronto buyers?
A Bank of Canada rate hold is not a signal that buyers can stop paying attention to financing.
A mortgage pre-approval helps establish a realistic price range. A rate hold may also provide some protection if fixed rates increase while you are looking for a property.
The lender may approve a particular amount, but that does not mean you must spend it. There is a noticeable difference between qualifying for a payment and enjoying the lifestyle that remains after making it.
Buyers should look at the full cost of ownership: mortgage payments, property taxes, maintenance, utilities and—in the case of a condominium—monthly fees and the financial health of the corporation.
The Toronto market also refuses to behave like one unified market. A well-prepared house in a sought-after neighbourhood can attract considerable attention while another property, only a short distance away, sits.
The economic headlines provide context. They do not determine the value of an individual property.
What does this mean for sellers?
Interest rates affect how much buyers can borrow, but they also influence how buyers feel.
Even when buyers can afford a property, uncertainty may make them more selective. They compare condition, location, carrying costs and future work more carefully.
This is not necessarily a bad market for sellers. It is an unforgiving market for properties that are poorly positioned.
Preparation, timing, presentation and price need to work together. Buyers may still act quickly when a property offers the right combination of value and opportunity. They are less likely to overlook an ambitious price simply because the seller would prefer that they did.
So, should you buy, sell or wait?
There is no single economic statistic capable of answering that question.
Rates may rise. They may hold. Economic conditions may strengthen in one area and weaken in another. Bond markets may react to events taking place thousands of kilometres away before the Bank of Canada has issued its next carefully worded statement.
Waiting is still a decision, and it has its own costs and risks.
A better question is whether a move makes sense for your life, your finances and the part of Toronto in which you intend to buy or sell.
Once that is clear, we can build a strategy that does not depend on correctly predicting every move made by the Bank of Canada, the bond market or anyone else with a chart.
If you are considering buying or selling in Toronto, I can help you understand what is happening in the neighbourhood and property category that matter to you. A qualified mortgage professional can then help determine which financing structure best fits your circumstances.
Because “rates are holding” may be technically correct.
It just doesn’t mean nothing is moving.
Economic and mortgage information is based on the September 2026 Mortgage & Economic Outline prepared by Jason Friesen, Managing Partner and Mortgage Agent Level 2 with Outline Financial. Market probabilities and interest rates can change quickly. Mortgage advice should be obtained from a qualified mortgage professional.