🏡 Mortgage Rates Are Rising — But Not All Rates Are Rising!

Why Fixed Rates Are Moving Higher, Why Variable Rates Aren’t — and Why Your Mortgage Strategy Matters More Than Ever

If you've seen a headline recently saying “Mortgage Rates Are Rising!”, you might understandably think:

Uh-oh... should I put my home-buying plans on hold?

Not necessarily.

In fact, this is a perfect example of why I’m always telling buyers that the headline doesn’t tell the whole story.

Yes, many fixed mortgage rates have been moving higher.

But variable mortgage rates haven't moved with them.

Why?

Because they’re driven by two different things.

And understanding that difference can help you make a much more informed decision about your mortgage.

📈 Why Are Fixed Mortgage Rates Going Up?

Here's the important part:

The Bank of Canada did NOT just raise interest rates.

The Bank of Canada held its policy rate at 2.25% on September 2, where it has remained since October 2025.

What's moving is the bond market.

Fixed mortgage rates are heavily influenced by Government of Canada bond yields. When those yields rise, the cost of funding fixed mortgages generally rises as well.

And they've risen quickly.

The Government of Canada's benchmark 5-year bond yield went from 3.44% on September 8 to 3.65% on September 14 — a jump of 21 basis points in less than a week.

That has already started flowing through to mortgage pricing.

According to Canadian Mortgage Trends, some lenders have increased fixed rates by roughly 20 basis points or more, while some borrowers may see larger effective increases as lenders reduce special or discretionary discounts.

So...

Bond yields ↑ = pressure on fixed mortgage rates ↑

🌎 What's Pushing Bond Yields Higher?

This gets a little more complicated — but I'll keep it simple.

A major issue right now is inflation uncertainty, particularly surrounding higher global energy prices and geopolitical instability.

The Bank of Canada specifically noted on September 2 that the continuing conflict in the Middle East was keeping energy prices elevated, while trade tensions and tariffs were adding another layer of uncertainty.

Bond investors worry that persistent energy costs could feed into broader inflation.

When investors expect inflation — and potentially future interest rates — to remain higher, they generally demand higher yields to hold longer-term bonds.

And those higher yields eventually find their way into fixed mortgage pricing.

But here's where things get interesting...

🤔 Why Aren't Variable Mortgage Rates Rising Too?

Because variable mortgages play by a different set of rules.

Variable mortgage rates are generally tied to a lender's prime rate, which is strongly influenced by the Bank of Canada's overnight policy rate.

The Bank of Canada has kept that rate at 2.25%, and the major-bank prime rate remains 4.45%.

So while bond markets have been jumping around...

The Bank of Canada hasn't moved.

That means:

📈 Fixed rates can rise while variable rates stay exactly where they are.

This is one of those times when understanding how mortgages are actually priced becomes extremely important.

🏦 So... Should You Take a 5-Year Fixed Mortgage?

Maybe.

But I don't think anyone should automatically choose a 5-year fixed mortgage simply because that's what we've traditionally been conditioned to do.

Remember what you're actually doing:

You're making an interest-rate decision for the next FIVE YEARS.

And today's bond market is reacting to some very unusual and unpredictable global events.

If inflation persists and the Bank of Canada eventually raises rates, locking in today could prove beneficial.

But if geopolitical tensions ease, energy prices fall and bond yields retreat, today's elevated fixed rates could come back down.

Nobody knows with certainty which direction this goes.

And that's exactly why flexibility has value.

⏳ What About a Shorter Fixed Term?

This is a conversation I think more buyers should be having.

Instead of automatically locking into a 5-year fixed, perhaps a 2- or 3-year fixed term deserves consideration.

You still get the security of knowing your payment and rate during that period...

But you're not necessarily committing yourself to today's rate environment until 2031.

The trade-off?

Shorter fixed terms aren't always cheaper, and when the mortgage comes up for renewal you could face rates that are either lower OR higher than today's.

There is no free lunch here.

We're simply balancing certainty versus flexibility.

🔄 And What About Variable?

Variable is certainly worth discussing too — especially when there's a meaningful gap between available fixed and variable rates.

According to Canadian Mortgage Trends, some 5-year fixed rates are now roughly one percentage point above comparable variable rates.

That gap matters.

If you start approximately 1% lower on variable, the Bank of Canada would need to raise its policy rate several times before that initial difference was completely eliminated — assuming lender discounts and other pricing factors stayed comparable.

But variable isn't right for everybody.

Your payment and/or amortization can be affected if rates rise, depending on the mortgage product.

Some people can comfortably handle that uncertainty.

Others would rather know exactly what their mortgage payment will be every month.

Neither approach is automatically right or wrong.

🧮 This Is Where Mortgage Planning Becomes Important

The question shouldn't simply be:

“What's the lowest mortgage rate today?”

A better question is:

“What mortgage structure makes the most sense for MY situation?”

That means looking at things like:

🏡 How long do you expect to own the property?

💰 How comfortable are you if rates increase?

📉 How much could rates increase before your budget becomes uncomfortable?

⏳ Would a shorter fixed term give you useful flexibility?

🔄 Would a variable mortgage make sense given the current spread?

🔐 Is payment certainty more important to you than potentially benefiting from lower rates later?

🚪 What are the penalties if you need to sell or refinance before the term ends?

Those questions are often far more important than chasing a difference of a few basis points.

🏠 Does This Mean It's a Bad Time to Buy?

Absolutely not.

Interest rates are only one piece of the home-buying equation.

A quieter real estate market can create opportunities that disappear when buyer confidence returns.

You may have:

✔️ More inventory to choose from
✔️ Less competition from other buyers
✔️ More negotiating power
✔️ Time for proper financing and inspections
✔️ Sellers who may be more willing to negotiate price, conditions or closing dates

And here's something buyers sometimes forget:

You negotiate the purchase price once.

Your mortgage can change many times during the years you own the home.

If you buy the right property at the right price, you can refinance or renew that mortgage down the road as circumstances change.

You can't go back five years later and renegotiate what you originally paid for the house.

💡 My Message to Buyers: Don't Panic — PLAN.

Interest rates move.

Bond markets move.

Economic forecasts change.

And geopolitical events can turn today's mortgage-rate prediction upside down remarkably quickly.

Trying to perfectly time interest rates is extremely difficult.

Instead, I would rather help buyers answer a much more useful question:

“Can I comfortably afford the right home today — and how should we structure the financing?”

Maybe that's a 5-year fixed.

Maybe it's a shorter fixed term.

Maybe it's variable.

The important thing is that the decision is made intentionally, based on your finances, your plans and your tolerance for changing rates — rather than because somebody told you that everyone takes a 5-year fixed mortgage.

🏡 There Are Still Opportunities in Today's Market

I continue to believe this can be an excellent time to buy real estate for the right buyer.

The key isn't ignoring interest rates.

It's understanding them — and then building your purchase and mortgage strategy accordingly.

As both a Realtor and Mortgage Agent, this is exactly the type of conversation I enjoy having with buyers.

We can look at the property AND the financing together — purchase price, down payment, monthly payment, mortgage options and longer-term strategy — before you make the decision.

Because buying a home isn't just about getting a mortgage.

It's about making the numbers work for YOU.

📞 Rick Parks – Realtor & Mortgage Agent
Parks Real Estate Group | eXp Realty
📱 613-551-2866
🌐 ParksRealEstateGroup.com
📧 rickparks@homesforsalecornwall.com

For All Things Real Estate or Mortgage — Call Anytime. Always Happy to Chat.

Mortgage rates, lender policies and qualification requirements can change without notice. The examples and discussion above are for general educational purposes only and are not individual financial advice. Mortgage suitability depends on your financial circumstances, goals and risk tolerance. Speak with a qualified mortgage professional regarding your specific situation.

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