Understanding mortgage rates starts with understanding what influences them.

When the Bank of Canada announces a change to its overnight lending rate, it often makes headlines. But what does that actually mean for your mortgage?

The answer depends on the type of mortgage you have—or are considering.

What You Need to Know:

Variable-rate mortgages are directly affected by changes to the Bank of Canada’s overnight lending rate. When the Bank raises or lowers its rate, lenders often adjust their prime rate, which can change your variable mortgage rate and, in some cases, your payment amount.  Remember, your payment may or may not change depending on whether you have an adjustable mortgage payment or a static mortgage payment.

Fixed-rate mortgages work a little differently. They’re influenced more by Government of Canada bond yields than by the Bank of Canada’s rate announcements. That means fixed mortgage rates can change even when the Bank of Canada leaves its overnight rate unchanged.

Why does the Bank of Canada change interest rates? Its goal is to keep inflation under control while supporting a healthy economy. When inflation is running too high, the Bank may raise interest rates to help slow spending. When the economy needs a boost, it may lower rates to encourage borrowing and investment.

What is the Monetary Policy Report? Four times a year, the Bank of Canada releases its Monetary Policy Report (MPR). This report provides the Bank’s outlook on inflation, economic growth, and where interest rates may be headed. While the report doesn’t directly change mortgage rates, it can influence financial markets and expectations, which may affect fixed mortgage rates. For homeowners and buyers, it’s a useful snapshot of the economy and a helpful indicator of where borrowing costs may be heading.

The headlines may focus on rate announcements, but the best mortgage decision isn’t about chasing the lowest rate. It’s about choosing the option that fits your financial goals, budget, and comfort level.

If you have questions about how the Bank of Canada’s decisions could affect your mortgage, renewal, refinance, or next home purchase, we’re always happy to help.