The Bank of Canada set its target for the overnight rate at 2.25 percent on September 18, 2026. That policy rate is the benchmark that influences what lenders charge for mortgages, lines of credit, and other borrowing. Understanding how the rate works helps you make better decisions whether you are buying, renewing, or refinancing.
Key Takeaways
- The Bank of Canada policy rate stands at 2.25 percent as of September 18, 2026.
- The five-year posted mortgage rate at major banks is 6.09 percent as of the week of September 16, 2026, though most borrowers negotiate a lower rate.
- The Canadian Overnight Repo Rate Average (CORRA) is 2.29 percent as of September 21, 2026, reflecting the actual cost of overnight borrowing in the market.
- Policy rate changes flow through to variable-rate mortgages within days and influence fixed-rate pricing over time.
- Your borrowing power rises when rates fall and shrinks when they climb, because lenders qualify you at a stress-test rate above what you will actually pay.
How the Policy Rate Shapes Mortgage Costs
The Bank of Canada does not set mortgage rates directly. It sets the target for the overnight rate, which is what major financial institutions charge each other for very short-term loans. That benchmark ripples out to the rates consumers see.
Variable-rate mortgages and home equity lines of credit track the policy rate closely. When the Bank moves its target up or down, lenders typically adjust prime rate within a day or two, and your payment or the interest portion of it changes soon after.
Fixed-rate mortgages are priced differently. Lenders look at bond yields and their own cost of funds, which are influenced by expectations of where the policy rate will go over the life of the mortgage. A cut today may not lower five-year fixed rates immediately if the market already anticipated the move.
The five-year posted rate at Canada's six major chartered banks stood at 6.09 percent as of the week of September 16, 2026. That posted figure is a reference point, not what most people pay. Borrowers negotiate discounts based on their credit, down payment, and the lender's appetite for business. The gap between posted and contract rates varies, and you should compare offers from multiple lenders and a mortgage broker.
What CORRA Tells You About the Real Cost of Borrowing
The Canadian Overnight Repo Rate Average, known as CORRA, is the actual rate at which major institutions borrow cash overnight using Government of Canada treasury bills as collateral. It is a measure of what money costs in the market right now, not a target.
CORRA stood at 2.29 percent on September 21, 2026. It trades very close to the Bank of Canada policy rate because the central bank uses its tools to keep overnight borrowing near the target. The small difference reflects supply and demand for cash on any given day.
Some variable-rate mortgages are explicitly tied to CORRA rather than prime rate. If your mortgage contract references CORRA, your rate adjusts based on this published average.
What This Means for Buyers
When you apply for a mortgage, the lender must qualify you at the higher of the contract rate plus two percentage points or the five-year posted rate. That stress test determines how much you can borrow, not how much you will pay.
With the posted rate at 6.09 percent, many buyers are qualified at that figure even if their actual rate is lower. A policy rate of 2.25 percent keeps variable rates and discounted fixed rates well below the stress test, which means the gap between what you pay and what you must prove you can afford remains wide.
Lower rates increase your borrowing power because your income can support a larger loan at the stress-test threshold. They also reduce your actual monthly cost once you close. If you are shopping for a home, the current rate environment makes it easier to qualify and to carry the mortgage, compared to the environment two years ago when the policy rate peaked above four percent.
Renanza offers free home valuations and can connect you with mortgage professionals who explain how the stress test applies to your situation.
What This Means for Homeowners
If you have a variable-rate mortgage, your payment or amortization has already adjusted to reflect the 2.25 percent policy rate. If you locked in a fixed rate when the policy rate was higher, you are paying more than today's variable-rate holders, but you have certainty.
Homeowners renewing a mortgage this year are moving from contracts signed when rates were lower, in many cases. Even with the policy rate at 2.25 percent, your new rate may be higher than your old one if you locked in five years ago. Shop your renewal. Your current lender is not obligated to offer the best rate, and switching costs are low at renewal.
If you are considering refinancing to consolidate debt or fund renovations, the rate you qualify for depends on your equity, credit, and income. The current policy rate makes refinancing more affordable than it was in 2023 and early 2024, but you still pay a penalty to break a fixed-rate mortgage early. Run the numbers with your lender or broker before you decide.
What This Means for the Outlook
The Bank of Canada adjusts the policy rate to keep inflation near its two percent target. When inflation runs hot, the Bank raises rates to cool spending. When inflation is under control and the economy softens, it cuts rates to encourage borrowing and investment.
The September 18, 2026 decision held the rate steady at 2.25 percent. That suggests the Bank believes the current level is appropriate given the data on inflation, employment, and growth. Future moves depend on how those indicators evolve.
Mortgage rates will move in response to policy changes and to shifts in bond yields, which reflect investor expectations. No one can predict the exact path, but the direction of the policy rate over the next year will determine whether your borrowing costs rise, fall, or hold steady.
If you are planning to buy or refinance, locking in a rate protects you from increases but means you miss out if rates fall. Staying variable gives you flexibility and lower initial costs but exposes you to risk if the Bank reverses course. Your choice depends on your budget, your timeline, and your tolerance for uncertainty.
How Renanza Helps You Navigate Rate Changes
Whether you are buying your first home, upsizing, or investing, understanding how the policy rate affects your mortgage is essential. Renanza works with clients across Canada to find properties that fit your budget and connect you with professionals who secure competitive financing.
Browse active residential listings in your market, read our buyer guides for step-by-step advice, and check market news for updates on rates, prices, and inventory.
Sources
- Bank of Canada, Target for the overnight rate, September 18, 2026, https://www.bankofcanada.ca/core-functions/monetary-policy/key-interest-rate/
- Bank of Canada, Conventional mortgage 5-year posted rate, week of September 16, 2026, https://www.bankofcanada.ca/rates/interest-rates/canadian-interest-rates/
- Bank of Canada, Canadian Overnight Repo Rate Average (CORRA), September 21, 2026, https://www.bankofcanada.ca/rates/interest-rates/corra/
Data last checked: 2026-09-21
