Canadian Fixed Mortgage Rates Rise as Bond Yields Climb
Fixed mortgage rates increased in September as bond yields rose, offsetting slight gains in home affordability seen in August.
Key points
- The lowest five-year fixed mortgage rate rose from 4.09% to 4.24% in September 2026.
- Toronto buyers needed $1,510 less annual income to qualify for a mortgage in August.
- Halifax saw the largest affordability drop, requiring $1,360 more annual income from buyers.
The lowest available five-year fixed mortgage rate climbed from 4.09% to 4.24% in September. This increase follows a sharp rise in the five-year Government of Canada bond yield. The move erases recent gains in home affordability that buyers enjoyed in August.
August data showed falling prices eased buying conditions in ten of thirteen major markets. However, the rate environment has since shifted against borrowers. Lenders are no longer offering fixed-rate options below the 4.0% threshold.
Bond Yields Drive Rate Increases
Persistent inflation concerns and elevated energy prices drove the bond yield spike. Increased government borrowing also contributed to the volatility in global markets. Variable rates remained stable because they track the central bank's policy rate.
Fixed rates respond directly to bond market movements. The average Big Five bank rate was stable in August at 4.55%. It rose only one basis point from the previous month.
Toronto Leads Affordability Improvements
Toronto recorded the sharpest affordability improvement among the thirteen tracked markets. Buyers needed $1,510 less in annual income to qualify for a mortgage. The average home price in the Greater Toronto Area dropped by $8,700.
Vancouver and Montréal followed with income requirement reductions of $1,130 and $1,110. These gains resulted from average price declines of $6,900 and $6,300. These figures reflect the data from the Ratehub.ca Home Affordability Report.
Atlantic Markets See Deterioration
Halifax recorded the steepest deterioration in affordability among all markets. The average home price there rose by $6,500 to $563,800. Buyers in Halifax needed $1,360 more in annual income to qualify.
Ottawa and Fredericton were the only other markets where conditions worsened. Income requirements rose by $830 and $650 respectively. Wealth Professional notes that this uneven recovery challenges the outlook for a slow housing rebound.
